Vessel supply is tightening

dry bulk index
(Breakwave) For the first time in many years one can say that supply of dry bulk ships looks tight.

The dry bulk market has spent the last decade absorbing a sizable newbuilding program placed early in the past decade as a result of an extraordinary commodity market back then and sky-high freight rates.

The balance of supply and demand is gradually tilting, as scrapping has been healthy and new ordering has remained low. In the near term, however, another unexpected factor is further tightening the market balance, namely port congestion.

With COVID-19 related delays and disruptions, vessels are waiting longer in ports and that translates to lower effective supply. In the core Capesize sector, an estimated 7% of the global fleet is currently stuck in ports, a number that is double the level compared to a few years ago.

All of the above is effectively tightening the market and as a result rate volatility has increased, representing one of the earlier signs of a firmer overall dry bulk market that can potentially lead to considerable spikes in spot freight rates as we head into the end of the year and beyond.

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