Handysize dry cargo ships are between 10,000 and 40,000 dwt, supramax between 40,000 and 60,000 dwt. Panamax and post-panamax are between 60,000 and 100,000 dwt, while capesize is over 100,000 dwt. Most panamaxes today are over 75,000 dwt and are standard, non-specialized ships.
The world’s dry cargo fleet carries raw materials: coal, iron ore and other minerals, as well as grain and semi-finished products like steel, cement, fertilizers and timber. This means that the market is driven mainly by the demand for such raw materials, the world grain trade, and world economic growth in general.
Market fundamentals deteriorated further during 2012 as a result of another year with record high deliveries. Despite weaker global economic growth, tonnage demand increased at a decent rate thanks to China, which utilized the huge arbitration in iron ore and coal prices. China imported far more bulk commodities than the underlying demand for steel and energy would account for.
According to R. S. Platou the capesize sector saw a drop in earnings for 2012 as a whole from USD 15,200 to USD 9,400 per day, while panamax obtained USD 8,100 per day compared to a day rate of USD 14,600 the year before. Supramax earned USD 9,400 per day against USD 14,400 per day in 2011, while handysize day rates fell from USD 10,500 in 2011 to USD 7,600 per day in 2012.
Ship values fell steadily throughout the year, but the year ended with a significant increase in the transaction volume, especially for the larger sizes. This may be a signal that the fall in ship values have bottomed out. According to the Baltic Exchange a five-year old supramax now costs USD 18.3 million, down from USD 22.5 million in January 2012.
The M/S Belstar, M/S Belnor and M/S Belocean remained in 2012 on their long-term charter parties to Canpotex of Canada, a world-class marketing and logistics company that sells and delivers potash to international markets. All three ships have been operating satisfactorily without significant off-hire in 2012, although the operating costs were slightly above budgets.
The recent weakening of Japanese Yen has made Japanese shipyards more competitive and several new contracts were reported at the end of last year and early this year. Charterers want new buildings with “eco-design”, i.e. ships with low fuel consumption and low emissions, and in Japan it is now difficult to find available slots for 2015. The shipbuilding industry in China has ample available capacity, although here too ordering activity has picked up. Many believe that newbuilding prices have reached a low point in this cycle and pinpoint that shipyard margins are at an unsustainable low level. Growth in dry bulk fleet adjusted for scrapping is expected to be 7% in 2013 and to tail off further in 2014 after several years of double-digit fleet growth.
The dry bulk fleet has slack capacity due to slow steaming, but there is still a growing optimism based on an expected growth in China and a continued improvement for the US economy. Increased export capacity in Australia and Brazil for iron ore and coal will keep the international prices low. China has relatively high internal production costs for iron ore and coal, and will rely on continued import as long as this arbitration is profitable.