Uncertainty currently dominates the tanker market as the impact of the pandemic keeps extending the timeline for recovery, but the outlook looks promising for the dry bulk market, according to shipping association BIMCO. New virus variants and outbreaks of coronavirus infection in regions of the world with low vaccination rates continue to delay a recovery in the demand for oil. “This is especially problematic as real volume growth in demand for tanker shipping over the past decade has primarily been driven by the countries that currently have low vaccination rates and which are now facing new outbreaks as a result,” said BIMCO’s chief shipping analyst Peter Sand.

“Just as global demand for oil is currently below its pre-pandemic levels, demand for shipping is on the decline because the stocks that were built up over the summer last year are now being used.” US crude oil stocks are currently at their lowest level since January 2015, at 1,053m barrels, down from their peak in June 2020, when they reached 1,195m barrels. Mr Sand said that “lower stocks and rising demand indicate that either the US will have to start producing more crude oil or look to increase imports, a scenario that would be beneficial for the shipping industry.”

As the northern winter approaches, which is traditionally tanker shipping’s strong season, demand will remain subdued, he said, “with little hope of tankers achieving profitable freight rates on open trades this year, unless seasonal issues can stimulate underlying demand to boost earnings. As demand is forecast to exceed 2019 levels in 2022, the outlook for tanker shipping is better next year,” he conceded. “That said, better and good are not always the same thing and profitable rates may not be a reality until the second half of 2022.”

Meanwhile, with countries enforcing quarantine and testing requirements, and ports facing sudden disruptions due to local and regional outbreaks, the congestion that is draining the market of capacity will continue to support earnings in the dry bulk market, said Mr Sand. He expects the market to stay strong into 2022 until the factors that are currently beneficial to the dry bulk sector, such as congestion and pandemic-related delays, spill-over from the red-hot container market, stimulus-driven demand and strong growth in the manufacturing sector become less apparent. However, he is cautious over the longer term as the underlying volumes may be less supportive.

After strong growth in the first half of the year, China seems keen to clamp down on the steel and other heavy industries to limit emissions. One big question, he says, “is how strictly these measures will be enforced and whether they will start to constrain economic growth.” The two largest dry bulk goods imported by China in terms of volume, iron ore and coal, have both fallen year on year during the first seven months of the year. “Imports of both of these goods stood at a record high in 2020, and as government restrictions come into play, it seems increasingly unlikely that these levels of imports will be repeated,” he said.