The capesize bulker spot market’s rebound should continue as China strives to get the sector and its economy back on track, Genco Shipping & Trading’s chief executive said.
John Wobensmith expressed confidence that the sector’s continued rally will return rates to levels above smaller dry bulk sectors, to the benefit of 17 capesizes that make up nearly a third of his company’s bulker fleet.
“The capesize sector will start to come back. I do think you have more of a natural spread as you get into next year, meaning capes at a higher level than the subsize sector,” he said on Wednesday at Capital Link’s New York Maritime Forum.
His comments came as the the Baltic Exchange’s Capesize 5TC, a spot-rate average across five key routes, has ascended 33% since Friday to $16,760 per day on Wednesday.
The 5TC has clawed its way back, thanks to Australian and Brazilian iron ore exports and China’s plans to provide economic stimulus to a struggling economy, from $2,505 per day on 31 August.
It reached that low after plummeting for over two and a half months as China’s developers stopped building while facing billions of dollars in debt and a home buyer-driven mortgage crisis.
“China has taken a real beating with real estate and Covid lockdowns. I’m very positive that that’s going to correct itself going into next year,” Wobensmith said.
He said that China’s steel output has risen to account for 80% of his capesize utilisation as China has put healthy amounts of stimulus and infrastructure spending on tap.
The chief executive said he is “fairly optimistic on the larger ships” for 2023 because of the extremely low supply of vessels.
“The supply situation you just can’t ignore. It’s the best we’ve seen in a really long time and it continues,” he said.
“To order a ship today, you’re talking about 2025 for deliveries. We think we have a few good years at least.”
This supply scenario has allowed dry bulk shipping, which has become 40% dependent on China, to withstand China’s ebbs and flows with regard to its economy and massive real estate industry.
“It is the key driver of the dry bulk shipping industry, whether you like it or hate it. It’s here to stay,” he said.
Wobensmith pointed out that the extremely tight supply has enabled dry bulk shipping to come back from the 2008 financial crisis, Vale’s Bruhmadino dam failure in 2019 and the pandemic.
“The supply side allows these demand shocks to happen,” he said.
“I don’t see this demand shock being any different in that the Chinese government is not only being proactive, but they are incentivised to get their economy moving again.”