Shipping companies that transport commodities such as coal, iron ore and grain face a painful year ahead, with only the strongest expected to weather a deepening crisis caused by tepid demand and a surplus of vessels for hire.
The predicament facing firms that ship commodities in large unpackaged amounts – known as dry bulk – is partly the result of slower coal and iron ore demand from leading global importer China in the second half of 2015.
Symeon Pariaros, chief administrative officer of Athens-run and New York-listed shipping firm Euroseas, said the outlook for the dry-bulk market was “very challenging.”
“Demand fundamentals are so weak. The Chinese economy, which is the main driver of dry bulk, is way below expectations,” he added.
“Only companies with very strong balance sheets will get through this storm.”
“The state of the dry-bulk market especially indicates that economies worldwide are likely to stay weak, much to the disappointment of central banks… FX traders, miners, steel makers, trading houses, and commodity economies,” said Basil Karatzas, head of New York consultancy and brokerage Karatzas Marine Advisors & Co.
Ratings agency Fitch downgraded the shipping sector to negative, from stable, this month due to slowing global trade and an economic slowdown in emerging markets, adding that dry bulk would remain under pressure.