Highlights
– The Baltic Exchange Dry Index (BDI) peaked in late May and has since fallen sharply as lower Chinese demand and adverse global economic developments have impacted expectations.
– The IMF has lowered its global economic growth forecast to 3.2% for 2022 and 2.9% for 2023.
– Year-to-date bulk volumes have increased 1.9% y/y with minor bulks continuing to lead the way.
– We estimate demand growth in the 1-2% range for 2022 and 2-3% for 2023.
– Contracting has remained low, and the order book has reduced to 7.5% of the fleet size.
– The fleet is expected to grow by 2.7% in 2022 and by 2.2% in 2023, but capacity supply is expected to grow by only 1% rest-of-year and by 0-1% in 2023.
– We expect an improvement in the supply/demand balance during the rest of 2022 as the EU’s ban on Russian coal will add tonne miles, and Chinese demand could also rebound. We forecast further improvement in 2023.
– Risks of a global recession have increased, and lower economic growth could harm bulk demand.
Recent developments
The Baltic Exchange Dry Index (BDI) peaked at 3,369 in late May just as demand expectations slowed due to the impact of extended Chinese COVID lockdowns and increasing headwinds for the global economy. Congestion also began to ease and the BDI embarked on a downward trajectory. In late August, it hit a 2022 low of 865, matching levels last seen in June 2020. Year-to-date, the BDI has on average been 19.5% lower than during the same period last…
