Vessels carrying dry bulk commodities are
struggling to make a profit because of the double hit of lower
seasonal demand for cargoes and the Covid-19 pandemic that’s
wrecking trade and industrial activity worldwide.
“We’re really at the very bottom for dry bulk,” William
Fairclough, managing director of Wah Kwong Maritime Transport
Holdings Ltd., one of Hong Kong’s largest independent ship
owners, said in an interview.
Shipments out of Brazil, one of the dry bulk market’s main
shippers, continue to be low, and global supply chains are being
upended by the virus, he said. “The entire dry bulk carrier
sector’s earnings are basically nothing.”
The Baltic Exchange Capesize Index, a measure of freight
rates for bulk cargoes from coal-to-iron ore, has tumbled this
year, with a short rebound in April petering out. The Baltic Dry
Index, a broader gauge of vessel demand, plunged last week to
the lowest since 2016.
The virus is an additional blow to a market already in
pain. The early months of the year are seasonally weak, and
there were fewer iron ore cargoes from Brazil and Australia due
to weather disruptions. Last year, a dam disaster at iron ore
producer Vale SA lowered exports.
“We are now in uncharted territory because it’s impossible
to understand, or to gauge, when various lockdowns measures are
going to be lifted in different countries, or the impact of a
potential second-wave of infection,” said Fairclough. For bulk
shipping rates to see a sustained recovery, the India market
needs to return, and higher iron-ore volumes from Brazil to
China also are needed, he said.
Bulk shipping accounts for about 40% of the company’s
revenue, with the balance coming from the tanker market, which
has seen a big surge. Both sectors tend to move in opposite
directions, which safeguards the company’s earnings. Wah Kwong
currently owns 19 vessels with an additional five vessels under
construction across bulk carriers and crude oil sectors.
Fairclough expects a gradual improvement for rates in the
second-half after a wave of government stimulus packages and and
as economic and industrial activity in China recovers. The
shipping industry is also, by nature, one that can turnaround
very quickly, he said. “When it turns around, it can turn around
extremely quickly.”
(Bloombeg)