GM Drybulker fans. Don't take these rollercoaster rides in shipping industry too seriously - it is volatile in the seas lol.
What caused yesterday's slump in drybulk sector? Well, there has been a couple of articles and comments about drybulk markets published lately, which did not bother much to investigate all the factors, which cause the high shipping prices now and the sector's confidence in the coming years. The writers concentrated only on the number of new ships coming to the market, and did not analyse other factors that influence on drybulk shipping:
- the increasing need of commodities in the world economy, which is growing ca 6%/year. Urbanization of China, India and the rest of Asia, Pacific Asia, Russia, Middle East and even Africa consumes awfull amounts of iron ore, all kinds of minerals, cement, coal etc. In ten years time China will build over 500 coal fueled power plants, because oil is too expensive (and they don't need to bother much about environmental questions, they have not signed any of those international agreements, e.g. Kioto). The mountains of coal those 500 plants will need in future will already slurp the 500 newbuild Capes ordered.
- demolition of ships. 30% of the world's fleet is older then 20 years, 15% is older that 25 years. 23% of Panamaxes and 18% of Capesizes are older than 20 years. Now the commodity producers and the harbors are setting requirements to the loading ships, and many of them (Australians!) do not accept ships older than 20 years.
- another thing that is expected to increase the ship demolition is the lack of skilled manning.The shipping companies are already now alarming about to get skilled workers. The crews from older ships will naturally move to newer ships.
All of these things will affect the number of available ships in the future. I think the shipping companies know their business and have not overexaggerated their newbuilding orders.
Many people say that yesterday's strong slump in drybulk shipping stocks was also caused by shortsellers, who have gotten really scared in front of the 3Q earnings releases, and tried to push the stocks as low as they could. Who knows, but sounds quite reasonable.
A few day's sharp drops of the BDI index are usual in the shipping world.Up and down. The recent rice of BDI has been really hefty, and a correction was naturally expected.
But if the situation would be so bad in the shipping world, I think nobody could have got yesterday a 2 year contract for a Cape at USD150.000/day and a 2 year contract at USD78.000/day for a Panamax :)
AI
