Clarksons Shipbrokers at IREPAS: Freight rates remain historically low

Monday, 08 April 2019 17:17:19 (GMT+3)   |   Istanbul

Speaking at the SteelOrbis 2019 Spring Conference & 80th IREPAS Meeting held in Barcelona on April 7-9, Denny Sabah from Clarksons Shipbrokers said that, even though freight rates have improved markedly in the past two years, they remain at historically low levels. He pointed out that global seaborne trade of dry bulk commodities is at record levels, with over 5.2 billion mt being shipped last year, proving that the weaker freight rates in recent years are not due to lack of demand for vessels.

Mr. Sabah explained that the higher Baltic Dry Index (BDI) does not signal more trade. “The BDI is strongly influenced by Capesize rates, which are particularly volatile. Therefore, if a business does not use Capesizes, other Baltic indices (e.g. BPI, BSI, BHSI) will provide fairer representations of their freight rates. Freight, like many commodities, is more volatile today than it was before the boom,” he said.

According to the Clarksons Shipbrokers official, ordering of new vessels was unsustainably high during the boom, and owners were overly optimistic again at the beginning of this decade; however, 2016 experienced the lowest orders in over 30 years. He recalled that freight is a very cyclical market, and owners are prone to ordering when times seem to be improving.

Answering a question about the International Maritime Organization’s new regulation on limiting the sulphur content of bunker fuel to a maximum of 0.5 percent, Mr. Sabah said that ship owners will either start using the new type of oil which is more expensive or they will install scrubbers to neutralize harmful components, which will cost $1-3 million. He concluded that either way ship owners are going to start charging significantly more. 

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