Dry Bulk Fleet Growth to Slow to 3.1% in 2020
The largest international shipping association representing shipowners, BIMCO said that it expects dry bulk fleet growth to slow to 3.1% in 2020, after a 3.9% fleet expansion in 2019.
As this level of growth still exceeds demand growth, the market will also deteriorate in 2020, it pointed out.
Meanwhile, demolitions are expected to rise to 12 million deadweight tonnage (DWT) in 2020, up 4.2 million DWT from 2019. With expected deliveries of 39.3 million DWT, the dry bulk fleet is set to exceed 900 million DWT for the first time.
Demolitions this year are expected to include up to half of the VLOCs that were converted from very large crude carriers between 2007 and 2011.
At the start of February, 33 of these ships were still sailing, but many of the long-term contracts on which they had been employed – transporting iron ore between Brazil and China – are now coming to an end. With the current market offering little incentive to keep ships of more than 20 years old sailing, many will be heading to the scrapyards.
Given the high volume of Valemax ships delivered in the past two years, totalling 12 million DWT, and a further three 400,000 DWT ships slated for completion this year, demolitions of older vessels will not result in a shortage of VLOCs.
Before the coronavirus outbreak, BIMCO estimated that demand for dry bulk shipping would grow by between 1.5% and 2.5% in 2020, compared with only 1.1% growth in 2019.
The higher growth in 2020 is much needed to mitigate the increased costs associated with compliance to the 2020 sulfur cap. However, demand growth at the lower end of the range now looks more likely to be a best-case scenario following the outbreak.
As fleet growth will be higher than even the best-case scenario for supply growth, the fundamental balance is expected to continue worsening in 2020.