Dry bulk orderbook remains near historic lows

Dry bulk shipowners looking to expand their fleets are increasingly turning to leased vessels and secondhand purchases on concern that newbuildings could become quickly outdated by new environmental regulations, keeping the order book for bulkers near the lowest level in 27 years.

Shipowners currently have placed orders for bulkers equal to 7.5pc of the total fleet, based on deadweight tonnage, rebounding slightly from 6.9pc in November 2022, which was the lowest level since 1996, according to shipping association BIMCO.

Orders for Capesize bulkers and Panamax segment bulkers are trailing orders placed last year, while Ultramax, Supramax, and Handysize bulker orders have remained steady with 2022, according to shipbroker BRS Group.

Increasingly stringent environmental regulations by the International Maritime Organization — most recently regulations on sailing speeds through the Energy Efficiency Existing Ship Index (EEXI)/Carbon Intensity Indicator (CII) — has many shipowners hesitant to invest in new bulkers. They are concerned that new technologies for consuming less conventional fuel at higher speeds will be developed soon to better comply with these regulations, leaving shipowners who choose to build with current technologies at a comparative disadvantage.

The dry bulk fleet will grow by 2.7pc this year and by 2pc in 2024 on continued low deliveries and demolitions, BIMCO said. But slower shipping speeds due to EEXI and CCI means that, at least through 2024, supply is expected to grow by 0.5-1.5pc less than fleet growth, the association said.

Star Bulk, the largest dry bulk shipowner among US and European-listed companies, has chosen to charter new vessels for seven-year contracts as a way to replenish the average age of their fleet while avoiding the risk of buying new vessels, among other other major headwinds stifling the construction of new vessels.

"Environmental regulations, increased shipbuilding cost and limited shipyard capacity are keeping new orders under control," the shipowner said.

These factors also have shipowners focusing instead on the secondhand market as newer vessels already in the water are currently pricing close to newbuilding levels without the associated 2-4 year wait for delivery.

New Capesize bulker orders could account for only 27.8pc of overall deliveries in 2024, significantly lower than their 40.9pc 10-year average, according to BIMCO. The drop is driven by volatile rates for the larger bulker and only a 0.6pc difference between prices for newbuildings and five-year-old ships, as the cost of vessels in the secondhand market remains elevated, BIMCO said.

By Ross Griffith