Dry bulk shipping sees falling freight rates

The first two months of 2020 have seen freight rates for dry bulk shipping fall due to seasonality, higher fuel costs and disruption caused by the coronavirus outbreak.

Panamax and Handysize earnings declined to US$3535/day and US$3502/day, respectively, reports Denmark-based global shipping organisation BIMCO.

While rates have a history of dipping at the start of a new year, the higher cost of fuel following the IMO 2020 sulphur cap also significantly affected earnings for shipping companies.

In addition, the outbreak of the coronavirus has also seen demand for shipping ease, putting downward pressure on rates. For example, Chinese dry bulk imports have faced severe disruptions as a result of the epidemic and the usual demand recovery after the Chinese Lunar New Year holiday did not materialise. Moreover, delays in ports further aggravated the situation for shipping companies.

On the supply side, the net fleet expansion is predicted to slow from 3.9 per cent in 2019 to 3.1 per cent in 2020. However, this is expected to outpace any forecast growth in demand, resulting in a softening shipping market.

With a deteriorating demand-supply balance, shipping rates going forward are expected to decline.