World Grain - July 2017 - 55

FEATURE: SHIPPING RATES STABILIZING AT HIGHER LEVELS

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47% compared to a year earlier; while the price of shipping a
tonne of grain from the USA Gulf to Japan cost an average of
$34 per tonne, up 26% year on year.
RATES FIND 'NEW NORMAL'
Speaking earlier this year, John d'Ancona, divisional director for dry bulk analysis at Clarksons Platou Asia, predicted
that the higher ocean freight rates experienced at the start of
2017 were part of a new normal. He said shippers should expect ocean freight rates to remain volatile, but predicted they
would generally be higher through 2017 than in 2016 as vessel supply and demand converged, a trend that meant "freight
has suddenly become interesting again," at least for investors
and vessel owners.
After the "worst shipping market ever at the start of 2016,"
he said "rates should stay supported through 2017 relative to
2016," adding that there was now support for freight rates
across numerous dry bulk commodities.
"This improvement in commodity support is helping
freight, as is improved infrastructure demand and healthy
bulk trades led by grains in some markets," he added. "A lot
will depend on sentiment, but a lot of people in the market
want to see higher rates. They've had enough. No one knows
for sure what will happen but always keep an eye on dry bulk
market sentiment."
Sharan also said it was likely freight markets would trend
upward. Drewry expects high demolition activity and low
newbuilding deliveries to mean that growth of the bulk carULHUÀHHWZLOOVORZWRDQDQQXDOUDWHRIRYHUWKHQH[W¿YH
years. By contrast, tonne-mile demand will grow at a faster
pace of around 3% per annum. Sharan said that as supply
and demand became more balanced over the forecast years,
charter rates were expected to improve gradually.
"I think we have come out of the worst phase of dry bulk
shipping," he told World Grain. "We should see rates moving
up from here, though gradually."
However, he argued that the lack of consolidation via mergers and acquisitions in the bulk shipping market compared to
other shipping segments would prevent any extended rates
surge based on owner cooperation as vessel supply and demand drew closer together.
"The dry bulk shipping market is very fragmented, very
XQOLNHWKHFRQWDLQHULQGXVWU\´KHDGGHG³,WLVYHU\GLI¿FXOW
for owners to come together and follow any course of action.
It is very demand-dependent."
He also took a different view than many of his peers when
examining the types of factors that would impact on owner
behavior in the current market.
"I have a contrary view," he said. "I think we will see less
lay-ups from now onwards. However, scrapping will be decided by the impact of regulations such as those governing ballast water management systems and SOx/NOx emissions over
the next few years.
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World Grain - July 2017

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