The oversupply of the dry-cargo tonnage keeps going on, Wells Fargo Securities says.
Analyst Michael Webber said, “We continue to believe the significant oversupply of dry bulk tonnage on the water, and continued near-term fleet growth will be material headwinds for the sector, likely keeping rates, asset values, and the stocks in check”.
While scrapping may offer some relief from the flood of newbuilding deliveries, he notes the panamax and capesize fleets are relatively young - blunting the impact of elevated demolition in the long-haul trades.
“Scrapping is only a partial safety valve,” Webber wrote. “While scrapping reached 3.4m dwt last June, it fell to an average of 1m dwt per month in Q4 2011 as spot rates improved.
“In short, there remains no avoiding this oversupply, which we believe will remain the sector’s biggest variable for the foreseeable future.”