Strongest start of the year in the dry bulk market since 2014 supports KCC’s earnings
Image: From left Anne Mette Hansen, Senior Chartering Manager and Peter Lindström, Head of Klaveness Research
Strong global iron ore shipments, increasing Chinese coal imports and strong grain exports from US have fueled the dry bulk market at the start of 2021. Average Kamsarmax earnings over the first three weeks of 2021 has hit $14,100/day, the strongest start of the year since 2014. Head of Klaveness Research, Peter Lindstrøm, has a positive view on the dry bulk market for 2021 saying “in the absence of new black swan events we firmly believe 2021 will deliver demand growth exceeding fleet growth”. KCC, trading its fleet in both the dry bulk and product tanker markets, is set to benefit from an expected healthy dry bulk market in 2021.
With the strong start to the year in the dry bulk market, we check in with Head of Klaveness Research, Peter Lindström and with Senior Chartering Manager in KCC, Anne Mette Hansen to get some more insights to the dry bulk market, the expectations for 2021 as well as how a strong dry bulk market impacts KCC.
Peter Lindström says, “the strong market to date in January is driven by the global iron ore exports reaching an all-time high in December 2020, resumption of Chinese coal imports, freezing conditions in the Far East and strong grain exports from the US.
Kamsarmax dry bulk average spot TCE-earnings (P5TC_82) first 3 trading weeks of the new year and 8 last trading weeks of the preceding year
Peter comments that the trade outlook for all main dry bulk commodities is positive for 2021 and continues: “We are confident that the coal trade will recover a large share of the lost ground in 2021. At start of the year the drivers for growing coal trades will be the energy deficit in the Far East while in the latter part of the year the largest driver will be the post COVID recovery effect” (read more here)”. He adds: “Iron ore exports will likely increase sequentially over the last three quarters of the year as Brazilian export recovers and all seaborne exporters try to capitalize on soaring iron ore prices (read more here)”. Peter expects global grain exports to grow from a high base in 2020 to a new all-time high in 2021 (read more here). With a historical low dry bulk fleet growth in 2021, estimated by Klaveness Research to 1.6% (read more here), Peter is confident of a tight balance in the dry bulk market in 2021.
Anne Mette Hansen, who is responsible for fixing KCC’s vessels in the dry bulk market, highlights the strength of KCC’s combination carrier concepts with vessels trading both in the dry bulk and tanker market: “The KCC fleet is trading around 50% of available time in the dry bulk market. With a fleet of around 16 vessels on water in 2021, we will have around 8 vessels at any given time in the dry bulk market”. Anne Mette continues, “KCC’s "gearing” to the dry bulk market is in reality larger as our vessels earn more than standard vessels in their efficient combination trades with minimum ballast. With the current fuel prices, KCC’s vessels generate dry bulk earnings around 1.5 times the earnings of standard Panamax and Kamsarmax bulk carriers”. Anne Mette adds, “With KCC’s current fixed-rate dry bulk market coverage in 2021 being limited to around 40%, KCC is well positioned to reap the benefits of an expected healthy dry bulk market in 2021”.
