The demolitions of dry bulk carriers hit a monthly record high in March, an analyst revealed.
Speaking at Sea Asia on 21 April, Braemar ACM shipping analyst Peter Malpas revealed that over 5 million dwt of dry bulk tonnage was scrapped in March.
“If I look at the total amount of scrapping in the first quarter of 2015, it was over 10 million dwt,” Malpas said. “If we continue scrapping at that rate, we’ll see (that the) fleet growth (will) start to change by the early part of next year and the oversupply will start to erode by the end of 2016.”
He pointed out that while it is still a significant amount of oversupply, he was optimistic that there would be support for the market due to significant scrapping, estimated by the end of the second half of 2017.
“There’s a lot of negative sentiment out there but there’re some signs of an end in sight. But there’s no doubt we have at least two and a half years of pain in the dry bulk sector,” Malpas added.
In the early 2000s, China’s rapid urbanisation provided employment for dry bulk carriers as steel production soared, generating demand for iron ore and coking coal imports from Australia, India, South Africa, and Brazil.
However, currently, China’s infrastructure development is peaking, noted Malpas.
The Chinese economy, he said, is moving more towards consumerisation, where the middle classes are centred. The property boom is currently experiencing deflation, which has a significant impact on steel consumption. He predicted that GDP growth will be moderating from double-digits to about 6%.
“Significant growth in Chinese steel consumption has happened and we’re now reaching a plateau. As we go into the next decade, we’ll see some reduction on a systematic basis for total steel consumption,” said Malpas.