Concerns about overcapacity in the dry bulk trades are growing as low bunker prices prompt owners to increase sailing speeds especially on ballast legs.
Hamburg’s Ernst Russ Shipbroker warned principals in its latest maritime overview report that the capesize spot market could be faced with a double-digit increase in effective tonnage capacity following a further slide in bunker prices.
HFO 380 spot prices for delivery at Rotterdam and Singapore eroded by more than 9% during September, closing the month at USD216 per tonne (Rotterdam) and USD227 per tonne (Singapore) while capesize average spot earnings were up some 50% month-on-month to USD13,734 per day by the end of last week. However, the current trend is softer again and Ernst Russ Shipbroker warns that faster sailing speeds could spoil a year-end rally in rates. Optimal speeds on ballast legs for positioning of capesize vessels to new loading ports has increased from just 9 kt in Q1 to 14.5 kt as fuel prices fell further while spot earnings improved.
“With today’s cheap bunker prices, it makes sense to speed up even though daily earnings might only be some bucks above opex,” Ernst Russ writes. Fleet productivity could rise by as much as 10%, stoking competition among ships for cargoes in the spot market, at least in the short to medium run.
Looking further ahead into 2017, the broker expects slow steaming to become more popular again amidst an expected rebound in crude oil and bunker prices. Massive investments in new oil production capacity were already being cancelled or shelved, Ernst Russ explained, stressing that it expects “quite a backlash on the supply/production side in the hydrocarbon sector”.