Dry bulk freight rates are forecasted to remain stable amid a "limited supply" and steady growth in trade, according to a new release from S&P Global Market Intelligence.
It said that the dry bulk demand growth rate is expected to decline to 0.2% in 2022 and settle at 1.7% in 2023, from 2.2% in 2021, while dry bulk fleet growth will slow to 2.8% in 2022, 2.2% in 2023, and 2.4% in 2024, compared to 3.4% in 2021.
"Dry bulk rates are forecast to remain stable in the coming years with limited supply and steady growth in trade—more bullish in the near term and bearish for the medium term," S&P said.
Global containerized export volume, on the other hand, is forecasted to decrease by 1.2% year on year (y/y) in 2022, compared to a 9.3% y/y growth in 2021, while US container imports will continue to grow marginally by 1.3% y/y in 2022, and 3% in 2023 and 2024 albeit at a much slower pace compared to a 13.0% y/y growth in 2021, the report added.
S&P also predicts the Baltic Dry Index (BDI) to "increase" in the early third quarter (Q3) compared to the second quarter (Q2) with the restocking demand from Europe before the Russian coal imports ban, scheduled for Q3, and seasonal recovery in shipments as well as continued strength in commodity prices.
Correction in freight rates in the second half
It further explained that container freight rates will also face correction and decline by 20%-30% to about US$6,000-US$7,000 per box (FEU) on average in the second half of 2022 from about US$9,000-US10,000 per box (FEU) on average during the same period last year.
"According to Commodities at Sea, S&P Global Market Intelligence, we continue to see the strength in Russian cargo shipments. The increasing number of ballasters toward Russian ports indicates that the stable shipments out of Russia will continue until sanctions, including the European import ban, are implemented in the third quarter of 2022," said Daejin Lee, lead shipping analyst at S&P Global Market Intelligence.
"European demand for Australian coal to prepare for the consequences of Russian coal import ban, as well as stable minor bulk shipments, including steel out of the Pacific Basin, is expected to support backhaul routes in the near term."
Lee noted, however, that a few downside risks to the dry bulk freight market are expected in the second half of the year including limited coal import demand from mainland China due to stronger domestic coal production in the country and reduced port congestion following the easing of COVID-19 restrictions.
The S&P analyst also said the softening of the container trade growth along with high inflation will also pose further risks to the market.
