French orders to foreign shipyards

The
dry bulk
market
in 1999
The pessimism that reigned among dry bulk shipowners at the
end of 1998 was confirmed in the first part of the year. In the
Pacific, demand for the entire range of vessels was weak or
faltering and freight rates reached all time lows. In the Atlantic,
after a particularly anemic year in 1998, the market progressively
picked up at the beginning of 1999 in the Panamax and
Handysize ranges, helped by a very firm grain market. The
Capesize sector remained morose until summer, with timecharter
rates in the Atlantic all in all lower than Panamax rates.
In the second half of the year, two major factors came
into play that changed the initial situation and distorted
short and medium-term analyses for market actors:
• The increase in bunker prices set in after February and
accelerated in the summer. Shipowners had immense
difficulty in getting charterers to go along with the voyage
freight rate increases that resulted.
• The European Capesize shipowner Bocimar’s coup that
resulted in the company controlling a large part of the fleet
available on the charter market. This action, which caused
much ado in the seaborne dry bulk transport microcosm,
will be discussed in detail later.
These two factors, in combination with a certain increase
Turnaround or
market hick-up?
in coal imports to the European electricity production market
contributed to the take-off in spot freight rates beginning in
August. Capesize units were the first to profit from this, with
the other sizes following.
From mid-October to the beginning of November, the market
was questioning if we were already at the end of the turnaround
after a severe drop in rates, from - 15 to 20% - set in.
In a nearly “perfect” shipping market dear to the hearts of neoclassical
economists, could a situation in which a single operator
took control of a part of the fleet, who would impose
their rates on the rest of the operators, result in any long-term
impact on time-charter levels which are the result by definition
of the matching of supply and demand? The question was
a worthy one. If an operator gave the push required to balance
the market when rates failed to reflect the true matching
of supply and demand, that operator was right, and could
justifiably move ahead of its competitors. If demand didn’t
then pick up in the medium-term, which would result in a
downward pressure on freight rates, the heavy investment
incurred by such an operation would never be recouped.
Regardless of the outcome, sustainable turnaround or downward
movement, following several very good years, 1999
proved active for the market, and consequently, intriguing.
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