DRY-CARGO MARKET ENTERED 2013 AMID GLOOMY PREDICTIONS FOR THE YEAR AHEAD.

DRY-CARGO MARKET ENTERED 2013 AMID GLOOMY PREDICTIONS FOR THE YEAR AHEAD. The first BDI reading of the year registered at 698, down a single point from the last report on Christmas Eve. Erik Nikolai Stavseth of Arctic Securities, said in a report today: We expected more drama in the dry bulk segment in 2012, but as banks have agreed to rearrange the stage for the second act even the most leveraged balance sheets seem safe. Applying our earnings forecasts to any company model should lead to a decline in cash balances and we expect more newsflow on distress sales or companies checking out. In that respect, dry bulk in 2013 could be a year more similar to how 2012 where companies with contract coverage had some cushion, but as charters run off or are renegotiated, we find them at equally bad terms as their spot-exposed competitors. He says the market is likely to turn the corner this year, but concern is likely to flip from supply to demand. It has been predicted that fleet dry-cargo growth will slow to 7% this year, down from 12% in the year just completed while demand growth is expected to stay at 7% in 2013, hence the base case is unchanged utilization and rates on average for the year. However, with substantially lower fleet growth in 2014 on the cards, there is an expectation of a sustained improvement of rates into 2014 and onwards. Capesize and panamax earnings both came down further over the Christmas period according to the first figures of the year from the London-based bourse. Only supramaxes were able to progress during the festive season as the struggles which characterised the final quarter of 2012 rolled over. It was noted that average rates were down by 40% between 2011 and 2012 with capes earning a slow-steaming adjusted $9,800 daily against $15,500 daily in the previous year. Preliminary data suggest demand for dry bulk ships increased 7%, less than the fleet which expanded by another 12% due to still high pace of newbulid deliveries as fleet utilization dropped from 87.5% in 2011 to 82.5% in 2012. For 2013, fleet growth is expected to slow to 7% on average for the year but with lower fleet growth at the end of the year of about 3% into 2014. Demand growth is expected to stay at 7% in 2013, hence the base case is unchanged utilization and rates on average for the year. However, with substantially lower fleet growth in 2014 on the cards, there is an expectation of a sustained improvement of rates into 2014 and onwards.