Analysts at international shipowning organisation BIMCO have attempted to answer the question many in dry bulk have been pondering all year – whether or not the sector is entering a supercycle similar to the record earnings seen in the first decade of the century. The BIMCO verdict? Far from it.
The most eye-catching chart issued by BIMCO yesterday in its analysis of the dry bulk market today compared to the highs experienced in 2007 and 2008 regarded ship values.
The value of dry bulk ships is far below the last supercycle levels. A comparison of the value of a five-year-old capesize ship today with August 2008 shows how big the difference is. In August 2008, the ship could be traded for around $153m. Today it could yield just $38m. Although well below 2008 levels, this is still the highest level since December 2014.
“Commodity prices have staged a comeback and are hovering around or above 2007 and 2008 levels. This has fuelled talk of a commodity super cycle. However, while dry bulk freight rates and ship values are currently high compared to the past 10 years, they are very far from earnings seen during 2007-2008 and there is little to suggest that they are heading that way,” commented Peter Sand, BIMCO’s chief shipping analyst.
Compared to the past 20 years, freight rates have been high during the first seven months of 2021, with all ship sizes averaging earnings that exceed $20,000 per day. However, compared to the first seven months of 2007 and 2008, the current rates are still far below.
In the first seven months of this year capesize rates have averaged $24,970 per day. In the same period of 2008, capesize rates averaged $147,475 per day. As a share of what they earned back in 2008, BIMCO analysis shows handysize rates come closest, but are still far below with average earnings so far this year at 55% of rates recorded in the first seven months of 2008. Panamax and supramax earnings stand at 36% and 41% respectively.
“Higher commodity prices are not the key to a supercycle in dry bulk shipping,” BIMCO argued.