We expect demand growth within the 1.5-2.5% range in 2023, driven by China’s economic recovery. Improvements in consumer sentiment should help solve the country’s real estate crisis and boost bulk demand.
However, demand growth could weaken to 1-2% in 2024 due to an expected reduction in coal shipments. Import demand should fall as India and China continue to boost domestic mining and Europe transitions away from fossil fuels.
The International Monetary Fund (IMF) estimates global economic growth of 2.9% in 2023 and 3.1% in 2024. The Chinese economy is now estimated to grow by 5.2% in 2023, a 0.8 percentage point increase over the IMF’s previous forecast.
The dry bulk fleet is forecast to grow by 2.7% in 2023 and by 2.0% in 2024. Deliveries remain limited amid a small orderbook at 7.5% of the fleet.
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Supply is estimated to grow by 0.5-1.5% less than the fleet in 2023 and 2024 due to lower speeds caused by compliance with EEXI and CII regulations.
The supply/demand balance should improve in 2023, although risks will remain in 2024. We expect rates to start recovering as demand picks up in China.
Capesizes should benefit from a recovery in iron ore demand, while panamax ships are most exposed to a drop in coal shipments.
We expect freight rates to improve from the second half of 2023 onwards as a pick-up in demand in China drives an improvement in the supply/demand balance. Even though we expect demand growth to slow in 2024 as Europe cuts coal shipments and import demand from India and China stabilises, supply is still expected to grow at a slower pace and market conditions may still improve marginally. The bulk carrier fleet should grow by 2.7% in 2023 and by 2.0% in 2024 amid limited deliveries. Additionally, we expect environmental regulations to reduce supply growth by 0.5-1.5% as sailing speeds fall. Overall, supply is expected to increase by 1-2% in 2023 and by 0.5- 1.5% in 2024, while demand growth is predicted at 1.5-2.5% in 2023 and 1-2% in 2024. The expected recovery in iron ore shipments should result in a welcome rebound in capesize market conditions that have suffered from the low iron ore volumes throughout 2022. Conversely, the expected loss of coal shipments in 2024 could be a cause for concern for panamax ships since coal accounts for over half of their volume. The predicted improvement in the overall supply/demand balance is quite marginal as demand will outpace supply by only 0.5 pp in both 2023 and 2024. As such, the improvement is still vulnerable to a variety of risks that could still affect the demand outlook for 2023 and 2024. A slower-than-anticipated economic recovery in China or a delayed resolution of the real estate crisis could have a direct and significant impact on demand, thus impacting overall conditions for the dry bulk market.