1996..Not A Vintage Year In Dry Bulk Markets Not A Vintage Year In Dry Bulk Markets
end up by concluding that 1996 was not one of its vintage years. Adversity, however, can be a stimulus to change. While the bulk sector is likely to favor the evolutionary rather than the revolutional option, Drewry Shipping Consultants' latest report, Dry Bulk Freight Rates and Chartering: Players, Strategy and Market, examines some of the fundamental moves that are starting to be set in motion. The dry bulk charter market in the new millennium looks set to be larger, possibly with a greater short term/spot focus, and with a greater presence of traders and niche market specialists. Furthermore, the role of shipbrokers may be less focused on "purely competitive broking" and more concerned with offering a greater range of client services. Market influence may well stem to an even greater extent from Asia; and it cannot be coincidence that many leading brokers are establishing regional presences in Asia.
The business conducted in the dry bulk market (put by Drewry at more than 1.6 billion tons in 1995) has created a seemingly endless number of participants.
Some may have a life related to just one transaction. At the other extreme, there are large scale operators working the market round-the-world and round-the-clock, concluding hundreds of charters per year. None of the market players can ignore the impact of the freight rate cycles on their fortunes though they can take both short and long term chartering decisions to capitalize on situations or protect their interests.
A large proportion of trade relies on the more stable long term contract arrangements, as oppposed to being fixed in the short term or "spot" market, which is dictated by near term motivations. Such arrangements tend to dominate the major mineral trades, for example, iron ore, coal and bauxite/alumina.
Consequently, the driving forces behind the market's underlying fundamentals and those shaping near term rate movements can be markedly different (although it cannot be denied that many of these long term arrangements are in practice underpinned by the ability to charter-in tonnage to work individual liftings).
Looking at the long term charter market for the major bulk trades, the established charterers in Europe and Japan continue to dominate activities. However, these industrial giants have begun to accede some of their market dominance to the newer players, in particular, Taiwan and South Korea in the Far East.
Iron ore imports in South Korea increased from 21 million tons in 1989 to 35 million tons in 1995, while Japanese and EU imports fell during this time. In the steam coal market, South Korean imports increased by a quarter in one year alone from 1994 to 1995.
Some of the newer participants in the charter market, the industries and chartering organizations in South Korea and Taiwan, were fairly active in the short term charter market in 1995, accounting for between one third and one half of their imports in some cases.
As these companies increase their requirements for dry bulk commodities, it may be that the share of spot charters in total seaborne trade increases. At any rate, the practice of putting a certain quantity of purchase requirements out to open tender on a regular basis may be a way of obtaining a balance between supply assurance and reduced costs.
In 1995, Drewry recorded single voyage charters amounting to 176.5 million tons, an increase of 45 percent on figures in 1990.
Grain trades in particular are firmly rooted in the short term charter market, and therefore take on an important role in shaping short term influences.
The most fundamental change to take place in the grain trades has been in the market's traditional seasonal cycles. In previous years, a key expectation of the autumn months was the size of Soviet chartering movements. However, the prospect of imports in the 50 million tons/year range may never return, moreover, imports of 25 to 30 million tons/year seem a remote prospect.
Again the geographical focus is moving toward Asian demand, especially from China, which in the past was a maize importer.
The new Drewry report gives an assessment of the chartering options and strategic chartering choices available to those active in the dry bulk market.
For more information regarding obtaining a copy of the report, contact Gary Poyntz at: (tel) +44 171 538 0191; (fax) +44 171 987 9396.
