Less than 60 bulkers were contracted in the first seven months of 2015, a drop of 91% y-o-y, and down from more than 1,200 in full year 2013. Combined with the firm pace of deliveries, this has led to a 20% decline in the bulkcarrier orderbook since the start of 2015. Deliveries are expected to remain firm in the short-term, but the lack of recent ordering could help to significantly slow fleet growth beyond 2016.

 Bulkcarrier contracting has been stifled this year by the weak market conditions and challenging outlook, with year to date earnings averaging $7,000/day. Only 58 vessels have been ordered, including one Capesize, 19 Panamaxes, 21 Handymaxes and 17 Handysizes.

 Overall, this is the lowest level of bulker ordering in a seven month period since 1999. Meanwhile, more than 400 bulkers have been delivered so far this year, causing the orderbook to shrink from 176m dwt at the start of 2015, to 136m dwt at the start of August. The Capesize orderbook has unsurprisingly decreased by the greatest pace, declining by almost 30% to 53.4m dwt.

 Sentiment in the bulker market has shifted dramatically since 2013, when greater optimism over the potential for market recovery caused a rush of ordering (more than 500 Handymaxes and 230 Capesizes were contracted in 2013). While the more positive mood has now dissipated, its legacy is still being felt in continued strong deliveries.

 More than 50m dwt is projected to be delivered in full year 2015, up 6% compared to 2014, with another 50m dwt expected in 2016. However, while ‘non-delivery’ trends (slippage and cancellation) will clearly impact the actual pattern of deliveries, the orderbook schedule for 2017 onwards currently appears relatively small at 21m dwt.

 This could help to reduce the pace of deliveries and fleet expansion after 2016. Based on the current orderbook, projected non-delivery trends, and an estimate for demolition based on average scrapping ages in 2012-15, fleet growth could drop to around 1.5% in 2017, or less than 0.5% if demolition reached around 21m dwt (the average annual volume of scrapping since 2009). Even allowing for further contracting in the remainder of 2015 (albeit at the sluggish rate recorded in the year to date), fleet growth currently seems unlikely to top 2% in 2017.

 Of course, these estimates are highly sensitive to the assumptions used, and it is not too late for a resurgence in newbuild interest, which might be stimulated by more attractive prices, to raise projections for deliveries in 2017. For example, if contracting in the rest of 2015 were to return to robust average 2013 levels, this could add 43m dwt to the orderbook, and boost fleet growth in 2017 to almost 6%.

 So, while the cut in contracting seen so far this year does seem ‘too little, too late’ to address oversupply in the short-term, with demolition providing the best option at present for slowing fleet growth, there appears to be the potential for a period of significantly reduced deliveries further ahead. While the outlook for dry bulk trade still appears challenging, the drop in orders this year has nonetheless increased chances of a slower rate of supply growth.
(Source: Clarksons)