Dry bulk ordering set for new excesses on higher earnings
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With dry bulk earnings expected to jump in 2h14, led by Capesizes, we can expect owners to order another 12% of the fleet (85 mdwt) during 2014, following a 12.3% of fleet performance in 2013. Once in a utilisation hole, it is difficult to exit without a major shift in demand and/or supply, given the elasticity of the supply curve at low utilisations. The current over-supply of tonnage is structural, and requires a structural solution. Ordering at this pace just ensures more carnage in 2017-18.
Dry bulk ordering set for new excesses on higher earnings
- 1. Given strong correlation between ordering and spot earnings, owners likely to over-order during expected 2014 rate rises Dry Bulk Ordering vs Real Spot Earnings, Quarterly 12% 120 Ordering, Percent of Fleet 10% 100 Avg Earnin gs (rh s) Sure, theyre Eco-design, but so unnecessary 8% 80 6% 60 4% 40 2% 20 Indexed Real Spot Earnings, US$000s/day Ord ering (lhs) Fcst 0% 0 1q03 1q05 1q07 1q09 1q11 1q13 Sources: Baltic Exchange, Various Brokers, Makai Analysis 息 2014 Makai Marine Advisors, All Rights Reserved Makai Marine Advisors LLC February 2014