The shipping industry outlook for 2019 and beyond remains uncertain after experiencing a relatively buoyant climate last year, thanks to the improvement in the dry bulk market driven by better freight rates across all shipping segments.
The dry bulk shipping demand is projected to grow by 2.5 percent in 2019, mainly driven by agricultural products and minor bulk commodities, whereas the global dry bulk fleet is projected to grow at 2.8 percent this year.
Malaysian Bulk Carriers Bhd (Maybulk) chairman Datuk Ahmad Sufian@Qurnain Abdul Rashid said the dry bulk market had improved last year as freight rates were better than in 2017, and significantly above the historical low levels in 2015 and 2016.
“This was attributed to an overall improvement in seaborne trades of dry bulk commodities, while supply fundamentals of dry bulk shipping remained reasonably healthy,” he said in the company’s annual report released today.
He attributed the growth in the dry bulk segment to the commodity demands particularly from China whilst a limited fleet supply growth provided the main platform for freight rate improvement across all the dry bulk shipping segments.
However, the market also experienced significant volatilities, with the Baltic Dry Index (BDI) fluctuating from a low of 948 in April to a high of 1,774 in July, followed by a decline in the fourth quarter and closing the year at 1,271.
Ahmad Sufian, however, is cautious on the ongoing global trade tension and the increasingly bearish commodity demand sentiments may affect growth of global seaborne trade rate.
“This, coupled with potential trade disruptions of dry bulk commodities such as coal, iron ore and grains, pose demand-side risks and may result in higher freight volatilities,” he added.
Going forward, Maybulk said that the mining incident in Brazil would cause a significant disruption in the dry bulk market and compounded the fall in the dry bulk freight rates that started in the fourth quarter of 2018.
“Concerns of weakening commodity demand in China and global trade uncertainties may impact growth.
“But, there is increasing expectation that ship demolition may increase as some shipowners may be inclined to scrap vessels instead of incurring additional costs for special surveys, installation of ballast water treatment systems and scrubbers to meet the International Maritime Organisation (IMO) 2020 sulphur regulations,” it explained.