Its Q4 2022 outlook puts MSI at the bearish end of forecasts but a period of pain looks increasingly likely for owners

The dry bulk market could be set for a downbeat 2023 with the pain potentially extended into 2024, according to the latest quarterly dry bulk market report* from Maritime Strategies International.

Behind the falling earnings picture is the faster than expected unwinding of port delays that kept the market buzzing during 2020-21, with port operations perhaps not far from approaching ‘normality’. While ballast and laden durations on specific trade flows may increase, MSI believes that any positive year on year impact on market balances in 2023 will be more than offset by reduced port delays.

MSI forecasts an improvement in fleet efficiency next year, recognising that the process is unlikely to be linear and both COVID-19 (and the policy responses to it) and geopolitical and trade influences will continue to be factors with the potential to affect fleet utilisation in significant ways.

“To put it one way, where Capesize markets have led towards the end of this year, others will soon follow.” said Plamen Natzkoff, dry bulk analyst with MSI. “We expect a cyclical downturn in the market over the next two-three years, characterised by pronounced weakness in bulk carrier earnings driven by the continuing erosion of support factors and tepid trade growth,”

On balance, a negative view for market balances and earnings chimes with increasingly bearish sentiment for the global economy; indeed, a more drastic downturn in economic output remains a realistic prospect, explored through MSI’s Low Case outlook. But, for dry bulk at least, China still has potential to surprise on the upside.

In recent reports, MSI has pointed to the potential for a near-term steel-intensive stimulus by the Chinese government, albeit predicated on a fall in energy costs and commodity prices, and a loosening in COVID restrictions.

Recent weeks/months have seen China taking a rising share of cheaper energy from Russia, whilst weaker demand around the world and easing supply chains have undermined commodity prices. Finally, a recent loosening of COVID restrictions hints at a rising possibility that a steel-intensive stimulus may be on the cards.

“Whilst MSI finds itself unquestionably at the more bearish end of recent dry bulk market commentary from brokers, owners and other analysts, our forecast for dry bulk spot markets in 2023 is not far different from current FFA contracts,” adds Dr Natzkoff. “Our analysis suggests that, without the benefit of a relatively small orderbook, market balances won’t begin to tighten again until 2025 with the potential for more meaningful growth in earnings from 2026.”