Dry bulk market on the rise

The dry bulk market has continued to improve over the past few weeks. In its latest weekly report, shipping broker Allied Shipbroking noted that “the dry bulk cargo market continued on its strong trajectory, having once again shown its strong and sustainable course since early last year. While we are currently enjoying these very high levels, as well as plenty of overall bullish sentiment within the shipping markets, things are apparently becoming increasingly fragile on the demand side and global economic fundamentals. We cannot easily argue whether this fragility will prove positive or negative as an end result in terms of shipping market performance. There is no denying the fact that things have been moving increasingly sour in terms of skepticism and uncertainty within the global markets. As such, we see a huge focus on all developments related to macro market trends. However, have we adequately monitored what phase of the market cycle we are currently in?

Source: Allied Shipping Brokerage

According to Mr. Thomas Chasapis, Research Analyst at Allied, “It may sound repetitive, but we must increasingly take into account the idea of ​​a changing market regime, something that classic measures of performance and market dynamics can miss. . Having used the next 3-year average closing FFA levels, as well as the 5-year unit asset price levels, the sustainability of the upward trend seen in the chart appears to be a major break with the “normal” of the last 10-12 years or so. In the past, it would have been difficult to see such a well-matched rise in both asset prices and FFA rates during a market recovery. The typical pattern would be to see some mild disconnects and lagged reactions in these two markets. This time around, most of the major market indicators are pointing in the same direction and are relatively in tune at the same time. Valuations are rising, freight returns have flipped previous lows, and the overall market size and capitalization have seen a rapid turn to the upside.”

“However, all of this cannot be taken as concrete evidence of where the true long-term market trend is, nor how sustainable current market conditions are. All we can see at this point is that the market still holds broad optimism both on paper and in the real market as to the earnings potential of the coming years. This collective view could well contain a pretty strong premise given what we are seeing from the tonnage supply side of the market and the current levels of the newbuild order book. However, one must not forget the overwhelming risk that hangs over the market at the moment, as central banks around the world seek to control rapid levels of inflation and the first signs of a slowdown in economic activity, while that ensure access to vital raw materials,” concluded Chasapis. .
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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