By Anastasia Vamvaka
Concerns are high in the bulk market, and despite the market being strong, the global geopolitical risk has now increased, affecting many parts of the world with as yet unknown results. The Russia-Ukraine conflict has a significant impact on energy and food prices – as a very significant proportion of world grain supply is grown and exported from western Russia / Ukraine, – the potential shortage of corn and wheat supplies (as well as other food-related by-products) is real.
Although the high level of volatility in 2021 may be slowing down, the dry bulk sector remains in an upward cycle due to relatively low supply growth, strong demand for bulk goods and continuing infrastructure bottlenecks and supply chain constraints. affect the entire shipping world.
A prolonged outage, however, will mean much higher prices, mainly affecting the world’s poorest populations based on such basic survival items, and at the same time squeezing the available dry bulk fleet as traditional trade routes will be replaced by alternatives, possibly inefficiency but also miles.
In addition, the market seems to be considering replacements in good sources such as coal shipments from Russia that can be replaced by longer distances from the US, while high-quality iron ore exported by Ukraine may also need to be replaced with comparable quality by Canada or Brazil.
All of the above will lead to longer times, which in turn will marginally increase fleet usage. Rapid developments in Ukraine have also resulted in a reduction in insurance premiums in the futures market, but the indicators are now positive.
Although smaller ships continue to find support as a result of an already expanding global supply chain, larger Capesizes do not have the same cargo dynamics, with the market eyeing on a “self-regulation” that is expected to take place. According to the Breakwave Advisors newsletter, Panamax fares reach 19,450 while Capesize fares reach 13,097
March has been combined as a month with the seasonality of goods with the market expecting some gradual improvement in the demand for iron ore transport outside Brazil for this and the general feeling is still positive.
This, combined with the relative strength in Panamax and Supramax interest rates, should also push Capesizes interest rates higher and closer to the mid-range of 20,000 currently shown by the futures market.
Source: Capital
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