Falling demand in the breakbulk sector has led to a faster-than-expected drop in multipurpose time charter rates.

Rates dropped 10% to $15,900 per day over the past month, according to the Toepfer Multipurpose Index (TMI).

That means they are down nearly one-third since their peak of $23,099 last July, when an 18-month bull rally ended.

Rates for these ships have declined fast than expected.

In August, panellists had projected that charter rates would fall by around 10% over the next 12 months.

“A recent drop in demand from the traditional breakbulk/neobulk market puts pressure on the time charter rates,” shipbroker Toepfer Transport noted in its January assessment.

It added, however, that rates remain historically strong.

Utilisation of the fleet remains high because there is healthy demand for breakbulk and large-scale industrial projects, it said.

The TMI assesses six to 12-month rates for a 12,500-dwt MPP/heavylift F-Type vessel.

Today’s rates are still comfortably above the five and 10-year averages of $10,849 and $9,234 respectively.

Panellists’ projections over the next six to 12 months point to a slower decline in rates, which is reflected in a small drop in newbuilding prices and lower secondhand sale-and-purchase activity.

“Prices are slowly softening. Buyers are not willing to pay record prices while rates are declining,” said Toepfer.

“At the same time there are many owners earning good money and therefore not willing to sell their vessels.”

Wider market

Smaller MPPs appear to be harder hit than the wider market.

The Drewry Multipurpose Time Charter Index, which tracks one-year time charter rates across a range of vessel types, including breakbulk and project cargo ships, declined by a marginal 0.5% in January to $9,946 per day.

That is just 10% lower than a year ago and 52% higher than two years ago.

But the analyst expects charter markets will be under pressure at the beginning of 2023.

Weaker economic growth will affect the MPP sector by increasing competition with containerships and bulk carriers, it said.

However, the decline in rates will be gradual, as project cargo demand will provide support.

Cargoes that are well suited for MPPs, such as wind turbine components, will provide employment opportunities in the sector, Drewry noted.