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A Tale of Two Cities: 2021 Dry and Tanker Market Analysis

Using Signal Ocean data, we analyse the trends and changes across the major vessel sizes in the dry and tanker freight market for 2021. This report provides data on demand, supply and how the latest developments determined the performance of vessels’ earnings. The year to date evolution in supply and demand paves the way for the stronger or weaker performance of freight rates in parallel with the global changes in the macroeconomic environment and the challenges arising from the growth of the world’s second largest economy: China. This time last year, we analyzed the effects of the coronavirus pandemic on commercial shipping with a focus on dirty tankers – VLCC, clean tankers – LR2 and dry – Capesizes.

 

With the end of 2021, global eyes are on Omicron and whether or not it will significantly reduce economic growth.

The world economy is said to be experiencing just 0.7% growth, in the final three months of the year, according to Bloomberg estimates. This is half the growth of the previous quarter and below the pre-crisis rate of around 1%.

With our annual review this year, we monitor the sentiment of demand and supply in the dry and tanker for crude and product segments. We initially focus on demand to capture the dynamics before we examine the supply trend lines with impact on freight rates and how the movements of the fourth quarter of this year could lead to euphoria in 2022.

SECTION 1: Demand
Dry – The Big Picture and Smaller Vessels

The big challenge for the evolution of seaborne demand for dry vessels is always the performance of the Chinese economy. We estimated the demand in ton days growth for this year per main dry bulk ship size and we envisaged a clear higher trend of growth for the Capesize segment, (chart 1), that boosted the sentiment of Capesize freight rates during October to the highest level since 2009. The question now is what about 2022? There are some early indications signalling a lower expansion in the growth of China, the world’s second largest economy, that will influence the evolution of demand for seaborne transportation for Capesize vessels.

Market consensus is that the growth of the world’s second largest economy will vary from 5% to 5.5% in 2022 as there were no records of sharp rebound within this year. The Chinese Academy of Social Sciences and the People’s Bank of China estimate China’s potential growth rate to be about 5.5% for 2022. Chinese growth slowed in the second half of this year, and there are predictions that the figure will be below 4% for the final quarter. However, official estimates for the full year growth will be released in mid-January.

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