Signal Ocean looks at the outlook for dry bulk freight fundamentals


In its just-published Dry Bulk Annual Review 2022, Signal Ocean says the year ended with critical changes in grain flows due to geopolitical tensions between Russia and Ukraine. In parallel, the Chinese real estate crisis seriously impacted Capesize vessels, while the energy crisis drove up coal flows and Panamax freight rates.

Amid the macroeconomic and geopolitical challenges, Signal notes that the volume of bulk cargo flows has remained stable over the past two years. Cargo flow volumes were helped by the Black Sea Grain Corridor Initiatiove in the third quarter, but freight rates in the Supramax and Handysize segments remained weaker.

A serious concern for bulk demand growth in the coming year is Chinese economic growth, as 2022 ended with GDP growth of at least 4.4%, but well above economists’ expectations. Economists had generally expected growth to fall to a rate between 2.7% and 3.3% in 2022. The Chinese government had maintained a much higher annual growth target of around 5.5%.

As regards freight rates, overall 2022 was a year of strong growth for the larger vessel categories, Signal says, although rates for Capesize vessels grew at a slower pace after the exceptionally high levels of 2021. Although the freight market for the larger vessel categories was above 2020 levels, rates for the Supramax and Handysize vessel classes were very weak, while the Panamax segment appears to be the winner in 2022. In the last days of the year ending, Panamax freight rates showed a strong performance and Asian coal demand paved the way for stronger demand and higher freight rates in the upcoming first quarter of the New Year.

Re vessel speeds, Signal says the Russia-Ukraine geopolitical crisis prompted shipowners to reduce the ballast speed of ships at sea, and 2022 ended with a record low ballast speed for bulk carriers. It is estimated that last year’s levels are the lowest compared to 2021 and 2020, as the larger vessel categories continue to have lower ballast speeds at sea. The fourth quarter suggests a similar slowdown in ballast speeds as freight rates enter a downward cycle at the start of the new year.