Larger vessels may command the most attention — not least because of the blocking of the Suez Canal by a container behemoth — but humble handysize bulkers are causing their owners an unaccustomed measure of excitement as freight earnings climb. So far this year, average daily earnings for handies have reached a time charter equivalent of $16,288, according to Allied Shipbroking research. Not only is that more than double last year’s annual average, it is the highest level since 2008 and the tail end of the dry bulk market supercycle.
Some of the factors that have pulled the market up are shared with other classes of bulker, such as a relatively low orderbook for new vessels. For handysizes, this is estimated at a total of about 95 ships, wrote Allied research analyst Ioannis Vamvakas in a market analysis this week that noted the rare degree of enthusiasm for handysizes. He put this into context by recalling the respective number on order at the start of 2016, which was 329. “Given the disappointing freight earnings of past years, many in the market had lost interest in this segment, which is clearly illustrated in the declining pattern of the orderbook on a year-over-year basis over the past five years,” he said.
While the constriction of the supply side had helped freight rates, today’s stellar levels would not have been achieved without demand factors, too, he noted. Trade in steel products, which is among the key cargoes for handies, has suffered in recent years but recently has shown “a robust recovery”, while other commodities such as grains, wood products and agribulks rebounded in the fourth quarter of last year, said Mr Vamvakas. He is optimistic that demand growth could be sustained “further into 2021” but owners “should be prepared for the possibility of an optimal equilibrium point being reached sooner or later”.
The greater earning potential of bulkers in the 20,000 dwt–40,000 dwt band appears to rekindled greater investment interest in such vessels, which have been relatively overlooked for several years. Allied’s research suggests that 46 handysizes changed hands in the secondhand market during the first quarter of this year, for an aggregate of far above $400m. According to the Greek shipbroking house’s own numbers, in the same quarter last year just a third of that amount was spent in the segment, with 20 handysizes traded for $136m.
Bulkers across the entire spectrum of sizes have been doing much better and if handysizes are entitled to celebrate louder it is mainly because they were often uninvited to previous parties. The surge in sale and purchase activity for the first quarter of 2021 reflects this situation, with Allied data showing more than $3bn of investment already in over 250 bulkers. That compares with about $890m spent on 91 bulkers in the same period last year.