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BULK SECTOR PROSPECTS POSITIVE BUT CHALLENGES AHEAD

Tuesday, October 30, 2018 

The bulk sector is navigating its way out of the doldrums but market correction has come at a price, delegates attending Bulk Terminals 2018 learned last week.

Speaking in Hamburg at the annual conference of the Association of Bulk Terminal Operators, Frachtcontor Director Frank Grone said that while the bulk segment is slowly but steadily working its way out of the doldrums with a positive cash flow, he reminded delegates that 60mdwt was scrapped in 2015 and 2016 at “ridiculous prices”, while financing banks took serious “haircuts” leaving bulk carrier owners faced with a complete wipe out of their invested capital. 

The trigger for recovery, he said, has been a healthy growth in demand, which in 2017 was in order of 4% with 3% expected for this year. Fleet growth was moderate in 2017.  

Congestion and slow steaming have been two ingredients for recovery as it kept tonnage off the market. Slow steaming is still the flavour of the month, but a 3 to 4 knot increase in speed could kill the upturn, Grone warned.

In summary, Grone said growth looks positive and fleet growth manageable but there are a number of challenges. 

These include the trade conflict between China, the US and EU, which, he said, will affect the shipping market negatively. “The market is not only driven by hard facts, but also by sentiments”.

Another area of uncertainty is what will happen as a result of the global sulphur cap due to come into force in 2020.

Commenting on the options available to meet the requirement, Grone estimated, on the basis of current use, that 66% of all fuel burned will have to be switched by 2020 to comply with the rules.

The challenge for shipowners will be how to pass the costs on to charterers and to realise the competitive advantage of installing scrubbers. Another strategy may well prove to be partnerships between charterers and owners of ships with scrubbers.

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