ECONOMY

Dry-bulk rates on the rise

The dry-bulk market is regaining its optimism, as the end of the summer held some pleasant surprises in store for shipping companies. Chartering rates followed a rising course, both in the capesize market, with the biggest ships, and in the new supramax category which is showing added dynamism, placed as it is between the capesize and panamax categories. The market’s rise began in the early summer, peaked in late August and remained at those heights. The average freight rate on five popular routes for supramax ships recently exceeded the $25,000 level for the first time. The derivatives market responded immediately, as contracts for freight rates in the last quarter of the year started at $48,200 per day for capesize vessels, while in July they did not exceed $43,500. Already actual rates have far exceeded that amount, as there have been charterings at $63,000 per day for newly built ships, while older vessels achieve rates ranging from $50,000 to $54,000. This is a very important development that no doubt vindicates the owners of dry-bulk ships, a sector where Greek shipping is first in the world. Already several people wonder whether the market has entered a new rising course after the decline since the end of 2005. Greek shipowners did not worry, though, as they had noted the sector’s positive signs and expected an improvement in rates. At the start of the year, a joint event by four listed companies (Quintana Maritime, Freeseas, Excel Maritime and Dryships) heard about the positive medium- and long-term prospects of the sector, as global demand continues to rise, thanks mainly to China. Market professionals explain the recent rise by pointing to improvement in the market’s fundamentals. China produced a record amount of 36.6 million tons of steel in July, making the demand for ships soar, as they are essential for transporting raw materials, such as iron ore and coal, to the Asian country. At the same time, the supply of ships has not risen accordingly. It is estimated that this year 6 percent more dry-bulkers will be added to the global register, with a total shipping capacity of 30 million dwt, not including ships heading for scrapping. Last year the global fleet numbered 6,000 dry-bulk vessels. By 2008, the existing fleet will rise by another 20 percent with ships to be delivered by shipyards, though the risk of oversupply has definitely passed, as most shipyards are not interested in dry-bulk orders and turn instead to the more profitable tankers and liquefied natural gas (LNG) vessels. Nevertheless, today’s global fleet is fairly old, as this year the ships older than 25 years represent a shipping capacity of 40 million dwt, while in 2007 they will cover 55 million dwt or 14 percent of the existing fleet.