MARPRO

BIMCO shipping market overview

15/09/2020
MARPRO Team
BIMCO shipping market outlook & overview September 2020 for dry bulk and container shipping.

DRY BULK SHIPPING: China’s demand keeping the dry bulk market going
An impressive recovery in Chinese dry bulk imports has protected the industry from the effects of falling demand in the rest of the world. High deliveries and low contracting have left the orderbook at multi-year lows, but – with the poor outlook – the current influx of new dry bulk ships orders is not what is needed.

Demand drivers and freight rates
The biggest story in the dry bulk industry in recent months has been the strength of the recovery in major Chinese imports. These are up across the board, breaking previous records, not just for monthly imports, but also accumulated over the first seven months of the year. The Chinese recovery has been strong enough to make up for lower activity in the rest of the world, with all ship sizes above their break-even levels.

Fleet news
The dry bulk fleet has seen both deliveries and demolitions rise over the course of the pandemic, while contracting has fallen steeply. So far this year, the dry bulk fleet has grown by 2.8% and breached 900m dead weight tonnes (DWT) for the first time. Currently at 903.3m DWT, BIMCO expects full-year growth to reach 3.5%. On the other hand, the orderbook has fallen to 63.4m DWT, its lowest level since April 2004.

Outlook:
With the start of September comes the start of the US soya bean export season, when the US replaces Brazil as the main exporter for the rest of the year. Outstanding sales of US soya beans for this marketing year – representing what has been ordered, but not yet shipped – total 24.2m tonnes, significantly up from the start of last season (9m tonnes). China accounts for 56% of total outstanding sales for this season.
While it is yet to be seen whether these soya beans will actually reach Chinese shores, even these higher sales are far below what is needed under the Phase One agreement between the two countries. China, however, has already stockpiled plenty of soya beans. Read more in link below.

CONTAINER SHIPPING: capacity management key to carriers’ profitability as volumes falter
Despite lower demand because of the pandemic, carriers have achieved high freight rates and profitability in the first half of the year through large-scale capacity reductions and low bunker prices. Tonnage providers have suffered the most so far, as they were left with many of the idle ships. Demand is showing signs of improvement, though, during a recession, it will be a long and drawn-out recovery.

Demand drivers and freight rates
The container shipping industry is particularly vulnerable to changes in consumer spending, which has been severely impacted by lockdowns across the world. April and May have so far proven to be the worst months for container shipping volumes, in line with when the strictest lockdowns were in place. Volumes have recovered in June and July, read more in link below. 

Comparing the first half of this year with last, accumulated volumes are down by 6.8%, to 78m TEU, a loss of 5.8m TEU. Volumes are down on all the major trade lanes, read more in link below.

Fleet news:
The container shipping fleet has grown by 1.6% since the start of the year, reaching a total capacity of 23.2m TEU. BIMCO expects that, over the whole year, the fleet will expand by 2.1%, which will mark a four-year low.

Outlook:
Though volumes have started to recover, actual demand for goods is still considerably down. The high rates are testament to shippers again frontloading their goods, this time ahead of a potential second wave of coronavirus around the world and resulting lockdowns. In late 2018, frontloading occurred ahead of an increase in tariffs because of the trade war. Total retail sales in the US, excluding food and beverages, are down 1.3% in the first six months of the year.
Higher unemployment and lower consumer income are looming, as governments start easing back on their stimulus measures. Even the higher state support was unable to stop consumer spending falling in the major consuming nations of the world. Read more in link below.

See link for full reports: 
BIMCO2020-September Outlook -Container_Shipping


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