Bulk carriers in the Handymax size group are enduring an extremely tough freight market, reflected in depressed rates and profitability. These medium-size vessels have a cargo-carrying capacity within a 40,000 to 65,000 deadweight tonnes range. Earnings from employment have been affected by surplus capacity, exacerbated by slowing growth of commodity trade in this sector combined with rapid fleet expansion.

In recent years Handymax bulk carriers have been a popular choice for shipowners investing in new tonnage. But this year’s exceptionally weak freight market, following a long period of subdued conditions, and greater uncertainty about prospects for recovery, is having a devastating impact. New ships are no longer seen as desirable and, as a result, ordering of these and Potential for further growth is still visible in some key commodity trades where Handymax bulkers are regularly employed. However, over-capacity in this sector and adjacent size groups, and the low freight rates prevailing, has greatly affected market sentiment. The timing and magnitude of a solid revival remains unclear, clouded by persisting robust fleet growth. Newbuilding deliveries from the huge Handymax orderbook assembled earlier are sustaining a strong flow of new ships on to the market.


The popularity of these ships as investment opportunities has been based on ideas about employment growth over many future years. Handymaxes are among the most flexible ships for operating around the world, given their versatility within a very broad range of dry bulk commodity trades. That view remains valid in the longer term, but ongoing weak market conditions have restrained enthusiasm.

Characteristics of Handymax bulk carriers demonstrate their inherent attractions. A typical ship is a ‘geared’ vessel (cargo- handling gear installed), with cranes and grabs for loading and discharging cargo. Sub-categories within the group are Supramax and Ultramax ships.

Cargo-handling equipment enables efficient operation in trades where shore based equipment is either unavailable or inadequate. Handling cargo offshore, from or into barges, at an anchorage is also facilitated. Larger bulk carriers in the Panamax and Capesize groups usually are ‘gearless’, and therefore are totally dependent on cargo-handling by port equipment.

Together with dimensions acceptable at a wide range of ports and berths, on most trade routes, while offering some economies of scale, the result is often an extremely varied Handymax employment pattern. These ships are frequently used in the coal, and grain and soya, trades and there is sometimes involvement in iron ore movements. Minor bulk commodity trades also provide numerous cargoes. Steel products, ores and minerals such as nickel ore, other industrial cargoes, fertilizers and various agricultural commodities including oilseeds and meals all feature prominently.


Brisk growth in the world fleet of Handymax bulk carriers continues. Following a lengthy period of deceleration, fleet expansion picked up last year and, although a resumed slowing is likely in 2016, enlargement is still quite rapid, as shown in the table. Another sizeable increase could be seen in the next 12 months.

Over the past three years fleet growth averaged almost 7% annually, after previously growing much faster. According to figures compiled by information providers Clarksons Research, Handymax capacity reached 179.5 million deadweight tonnes at the end of 2015 (comprising 3,323 vessels), about 32m dwt higher than at end-2012. Last year’s increase was 7.6%.

During the first nine months of this year, fleet deadweight capacity was augmented by 4%, boosting the total to 3,420 ships amounting to 186.7m dwt at end September. Within the entire world bulk carrier fleet of all ship sizes, now totalling 789m dwt, Handymax tonnage forms a large part, approaching one-quarter.

Among key influences affecting fleet capacity, Handymax newbuilding deliveries have remained very large, accompanied by substantial scrapping of older or uneconomical tonnage. Shipyards around the world completed 16m dwt of new vessels of this size in 2015, up from over 11m dwt in the preceding 12 months. Scrapping averaged just over 3m dwt annually in the past three years.

The number of new ships entering the Handymax fleet was much larger than the number exiting last year. A net 194 ships were added, resulting from 266 newbuilding deliveries partly offset by 71 scrappings (based on recorded demolition sales to scrap yards).

In 2016 as a whole the deadweight tonnage of new Handymax bulk carriers delivered looks set to decline, probably to 15m dwt or lower. This estimate is based on figures for the first nine months, showing 10.5m dwt already delivered (subject to revision), and ideas about the remaining period. Scrapping in the January–September period reached over 3m dwt and may approach 5m dwt in the full year, although scrapping forecasts are usually surrounded by great uncertainty. Consequently, fleet enlargement this year may be under 6%, about two percentage points below last year’s growth rate.


Next year a less rapid fleet capacity increase may be seen. There are signs that in 2017 the new vessels flow entering the world fleet may slacken, while another period of substantial scrapping may occur. But both inflows and outflows will be affected by how freight market conditions evolve, and the linked market expectations and sentiment, much of which is difficult to predict.

Newbuilding order books at shipyards are an indicator providing a rough guide to future fleet capacity likely to be added. Following heavy ordering of new Handymaxes in 2013 and 2014 (especially for Ultramax designs of around 60,000 dwt), the order book soared. Subsequently in 2015 ordering fell back steeply, and was rapidly overtaken by actual deliveries, reducing the outstanding total. While new contracts placed this year have been minimal, many of the orders placed earlier have not yet been completed and will be delivered during 2017 and later.

The Ultramax sub-category of larger 60–65,000dwt size ships is now dominant within the global Handymax newbuilding orders. Previously Supramax 50–60,000dwt ships were the most popular type contracted. Currently, over four-fifths of the Handymax order book deadweight capacity is comprised of Ultramax vessels.

Changing perceptions about the outlook for the freight market and investment returns are illustrated dramatically by events over the past three years. The remarkable ordering spree for new Handymaxes in 2013 and 2014 was heavily influenced by suggestions that a freight market recovery might be on the horizon. Coupled with attractive prices quoted by shipbuilding yards, many shipowners saw a strong incentive to invest. During those two years 790 Handymax ships were ordered, totalling over 48m dwt, equivalent to about one-third of the fleet at the beginning of the period.

During the past 18 months a dramatic change in newbuilding contracting dynamics has been seen, one of the most striking in the modern era. A collapse in new orders placed has affected all bulk carrier size groups. Within the Handymax sector ordering is now minimal, just four ships in the 2016 first nine months, after a reduced 131 in the whole of last year, according to Clarksons Research.

Very low freight rates recently and modified, less optimistic views of potential for a market recovery are reflected in this collapse. There are signs that longer-term trade growth prospects have deteriorated, while the fleet continues to grow briskly. The changed attitudes will eventually affect capacity additions a couple of years ahead. In the meantime deliveries from the large order book, which is still equivalent overall to 14% of the current world Handymax operating fleet, will continue enlarging capacity.

Another influence may restrain fleet growth deceleration in the immediate future. There is apparently limited potential for scrapping of old tonnage. The Handymax fleet is relatively young. Only about 13% is over 14 years old, and within that volume less than half is over 19 years old, mostly in the 40–50,000dwt size sub-group. Thus it seems difficult to foresee a surge in scrapping emerging over the next 12 months.

Wide employability is assisted by the typical features offered by a Handymax bulk carrier. Varying proportions of all dry bulk commodity trade sectors are accessible and, in most, large parts. However, major proportions of iron ore and coal movements do not normally employ Handymaxes, because the bigger Panamax, Kamsarmax and Capesize bulk carriers can be accommodated on many routes. Preference for these larger sizes reflects greater economies of scale, usually providing cheaper transport.

Coal trading is among the most prominent employment sources for Handymaxes. While both main parts, steam coal and coking coal, often use bigger ships, Handymax size cargoes amount to huge volumes. Seaborne coal trade is, in total, the second-largest global dry bulk commodity trade after iron ore, amounting to a massive quantity exceeding 1,100mt (million tonnes) last year, comprising almost one-quarter of all global dry bulk cargo movements.

After growing vigorously over many years, a significant change emerging is a much more pronounced impact from negative influences, affecting coal import demand in countries around the world. Global coal trade experienced a decline in 2015 and could see a further decrease this year. Movements are comprised of steam coal (used chiefly in power stations, and also in cement manufacturing and other industrial processes), and coking coal (used in the steel industry). Steam coal is the largest category, comprising over three-quarters of the total.

One coal trade employing Handymaxes extensively is shipments of mainly steam coal from Indonesia, which has risen to become the world’s largest individual steam coal-exporting country. The top exporter position has been maintained, but shipments have fallen in the past two years by 7–8% annually, down to 327mt last year. That annual volume is the equivalent of about 5,800 Supramax cargoes, although many larger ships are employed. Short-haul shipments to China form a large part.

Weakness in China’s coal import demand has adversely affected Handymax usage in the past two years, followed by signs of a pick up recently. In 2015 China’s overall coal imports (including lignite), a major part of world trade in this commodity declined steeply by 87mt or 30%, to 204mt. This year an annual increase may be seen. In the first nine months of 2016, the total reportedly was up by 15% compared with last year’s same period, at 180.3mt.

Extensive Handymax bulk carrier employment is also provided by the grain (including soya) trade. The most visible feature is highly variable and unpredictable changes in geographical patterns and quantities. During the past crop year ending mid-2016, global trade in wheat and coarse grains, and also in soyabeans and meal, increased robustly, but over the current year ending mid-2017 some negative factors are likely to weaken global import demand for grain.

Higher imports into numerous countries contributed to recent strength in grain and soya movements, facilitated by abundant export supplies around the world. According to International Grains Council calculations, global trade in wheat plus corn and other coarse grains increased by 21mt (7%) in crop year 2015/16 ending June, reaching 343mt. Global trade in soyabeans and meal was 11mt (6%) higher in marketing year 2015/16 ending September, at 195mt, based on US Dept of Agriculture estimates.

Handymax grain trade employment opportunities, over the past 12 months, benefited from larger imports into many Asian countries, Africa and Europe, while China and some other countries lowered their purchases. Soya sub-sector involvement was supported by China’s continued upwards soyabeans import trend, as well as increased volumes into other parts of Asia, the European Union and elsewhere.

The upwards trajectory of world soya movements is expected to persist during the 2016/17 year ahead, supported by China and others buying additional cargoes. Global wheat and coarse grains trade, conversely, could be weakened in particular by lower feedgrains imports into China and the European Union.

Bulk carriers of Handymax size are widely employed carrying cargoes in the ‘minor dry bulk’ category. Many elements of this commodities group are actually large, collectively amounting to massive annual volumes. The commodity range is extensive and in 2015 the total appears to have reached over 1,800mt. However, growth has slowed in the past couple of years, and that slacker pace may continue.

The biggest individual minor bulk trade components are steel products (coil, sheet, plate and other items), and forest products, although not all quantities are carried by bulk carriers. Bauxite/alumina for the aluminium industry, fertilizer raw materials and semi-finished fertilizers and cement provide very big tonnages, accompanied by large quantities of ores and minerals such as nickel and manganese ore,.

One prominent example, steel products exports from China, is a huge trade frequently employing Handymaxes. This trade has expanded strongly, as a result of an intensified focus on foreign markets, amid surplus capacity in Chinese steel mills caused by slowing domestic consumption. The annual total of China’s steel exports to all destinations has more than doubled in the past three years reaching 112mt in 2015, and could remain high. In the first nine months of 2016, the volume reportedly rose by 2%, to 85mt.


Recent investment interest has firmly shifted towards higher deadweight cargo capacity of 60–65,000dwt, at the top end of the Handymax size range, in the past few years. Previously the Supramax, typically 52–57,000 dwt, was the preferred unit and became ubiquitous, taking over from smaller Handymaxes

below 50,000dwt.
In the Handymax ordering boom of 2013 and 2014, Ultramax

60–65,000 dwt bulk carriers were the principal focus of attention. During those two years Handymaxes ordered had an average capacity of over 61,000dwt, showing how the popularity of Ultramaxes raised average size. As a result of the heavy ordering seen then, Ultramaxes still continue to dominate the global order book and future delivery schedules.

A typical capacity provided by an Ultramax is 63,000dwt or 64,000dwt, and cargo-handling gear of cranes and grabs for loading and discharging at a berth or anchorage is standard equipment. Improved fuel efficiency usually is also a notable feature. Expectations of expanding cargo volumes in many trades, requiring Ultramax size bulkers, reinforced enthusiasm for these vessels.

Advantages gained by using an Ultramax are clearly seen in trades where a cargo of around 60,000 tonnes — often coal, or minor ores or other bulks — is lifted from barges at an offshore transshipment terminal and then discharged at a similar installation at the other end of the voyage. This employment pattern occurs in many shorter haul trades within the Asian region and elsewhere. Alternatively, if an older gearless vessel is used, such as a Panamax of similar capacity, a floating crane is required, significantly raising transportation costs.

Chinese shipbuilding yards in particular marketed standard Ultramax designs which have proved popular. The Crown 63 of 63,000dwt and the Dolphin 64 of 64,000dwt were seen by shipowners as likely to prove efficient and potentially profitable, resulting in the yards obtaining many orders.


Subdued freight rates for Handymax bulk carriers have been a continuing feature this year, reflecting persistent large surplus capacity in this and adjacent vessel size groups. Sustained expansion of the world Handymax fleet, at a fairly rapid rate, amid slower growth in some key bulk trades employing these ships, has not assisted in restoring a better market balance.

Weakness was especially evident in the first quarter of 2016. The Baltic Supramax Index (calculated by the Baltic Exchange), a useful indicator of the sector’s freight market progress, fell to a very depressed low point of 243 in mid February, after retreating from a 2015 high point of 933 attained towards the end of August. But within six months it had recovered sharply to the 600–700 range in July 2016 where it remained into October.

How will this market sector evolve over the next 12 months or so? The Handymax segment is a distinct market sector, but it is not isolated from the bulk carrier market as a whole. Substantial over-capacity looks set to persist for some time across the bulk carrier size groups, delaying any move towards rebalancing. While growth in other size groups’ fleet capacity has almost ceased, Handymax capacity remains in a fairly rapid expansion phase, which is a more difficult obstacle for trade and vessel demand increases to match or exceed.

Uncertainty about the future freight market trend has intensified. Sluggish recent global seaborne trade development, together with no clear signs of a strong pick up during the period ahead, have lowered expectations. But a further slackening of Handymax bulk carrier fleet growth looks quite likely in 2017 as the large newbuilding orderbook at shipyards rapidly diminishes. Although a sustainable solid improvement in freight rates may remain elusive in the near term future, an improvement in the market balance may become more achievable later.