Consolidation not the answer for dry bulk sector

Khalid Hashim
Khalid Hashim, managing director of Precious Shipping accused dry bulk shipowners of acting like "unsupervised children."

An expert panel examining the outlook for the dry bulk sector at the 6th Asian Logistics and Maritime Conference in Hong Kong this week, concluded that consolidation along the lines being pursued by container lines was unlikely to be repeated by dry bulk shipping.

Henriette Van Niekerk director and global head of Dry Bulk Freight Analysis at Clarksons Platou, ruled out consolidation as a manipulation of the market while Jack Hsu, managing director of Hong Kong’s Oak Maritime insisted that the economies of scale that the liner sector was seeking was not needed in dry bulk because it was tramping.

Khalid Hashim, managing director of Thailand’s Precious Shipping laid the blame for the woes of dry bulk shipping in the hands of shipowners who he accused of acting like “unsupervised children” in a candy store ordering ships and destroying markets without taking measures to bolster the market.

Zhuang Wei, the regional manager in Asia for Bimco, broke away from the pack suggesting that consolidation was possible in the dry bulk sector with larger players placing an increasing focus on risk management and return on capital employed, thereby creating a new model for dry bulk.

Dr Wei added that protectionism was a factor in the poor performance of the dry bulk sector, a threat that could loom larger as all the leading trading nations were increasingly looking to protectionist policies.

Although the Baltic Dry Index reached a two-year high in November, it was felt by the panel that the spike could not last while the sector continued to struggle with overcapacity.

Dr Van Niekerk insisted that the business needed a healthy dose of logic to be sustainable, which should be led by a series adjustment in shipyard capacity. She based this assessment on the fact that just 80 shipyards received orders in 2016, while just 42% of newbuildings scheduled for delivery actually delivered in 2016.

In a rare expression of optimism Mr Hashim felt that China’s Belt and Road initiative with its emphasis on infrastructure projects across more than 60 countries was bound to have a positive impact for dry bulk operators. “The projected investment in Belt and Road of US$1.4trn is about 12 times larger than the Marshall Plan (the American initiative to aid Western Europe after World War II), he said.

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