10-01-2023 Star Bulk expects ‘extremely weak’ supramax market to recover after Chinese New Year, By Michael Juliano, TradeWinds
Star Bulk Carriers expects the supramax bulker spot market to pick up after the Chinese New Year after seasonal factors pushed rates to their lowest level in more than two years. The New York-listed bulker owner’s forecast came on the same day that spot rates on the Baltic Exchange’s Supramax 7TC route basket slipped to $8,831 per day, marking the first time it has fallen below $9,000 per day since July 2020. “Indeed, the supramax market is extremely weak,” deputy chief investment officer Constantinos Simantiras said on Tuesday during an online question-and-answer session hosted by Capital Link. “It’s the weakest sector in dry bulk industry right now and especially in the Pacific. In the Atlantic the market is slightly better.”
He said that supramaxes and other geared bulkers are typically “extremely seasonal” during the first quarter, especially in February. “We do believe that there will be a recovery after the Chinese New Year,” he said. “Especially on the smaller sizes, the demand starts to go through its seasonal downturn, which begins around November and bottoms out by February this year.” Demand for the smaller bulkers should improve after the week-long Chinese New Year holiday ends at the end of January and the Latin American grain season takes place from March to the end of May, he said. “We do expect the smaller sizes to recover first over the next two months,” he said.
The future market for supramaxes shows similar expectations over the next several months. February contracts stood at about $9,500 per day on Tuesday, while forward freight agreements for March came in at $11,300 per day. Meanwhile, Simantiras said the capesize sector is expected to outperform the smaller bulkers during the second half of 2023 because China has announced a significant stimulus to support the real estate market. “This is something that we expect to have a stronger effect as we approach the second half of 2023,” Simantiras said. “It’s worth noting, though, that since November Chinese imports have experienced a major rebound and we are definitely at the early stages of the demand recovery.” In mid-2021, China experienced a “major slowdown” in steel manufacturing because of its ailing real-estate sector, but the country has postponed a cap on steel-industry emissions from 2025 to 2030, Simantiras said. “This provides a significant upside over the next years and a very strong demand case for the dry bulk industry,” he said.