As reported by the National Bureau of Statistics of China, Chinese industrial production contracted by 13.5% over January and February 2020 implying a lower demand for key dry bulk raw materials such as coal and iron ore. In effect, this lowered the demand for dry bulk shipping.
As a consequence of the lowered dry bulk demand, we saw that the global fleet speed decreased. The bottom was reached with at 5-year low average speed on February 18, when the global dry bulk fleet hit 10.8 knots. The relationship dictating this development is that by lowering fleet speed, the utilization of the dry bulk fleet effectively decreases and ultimately limits vessel supply. In this case to match the lower demand on the back of the Chinese production decline. We depicted the historical development of fleet speed in Figure 1.
Looking at the different vessel segments and using fleet speed on a relative basis against the 5-year segment averages, the Capesize segment showed the steepest decline over the first months of 2020. As a consequence of the declining Chinese production, the coal trade suffered and disproportionately hit the Capesize segment, resulting in lower Capesize fleet speed. Figure 2 illustrates Oceanbolt’s data on the development of the individual vessel segments.
While hitting a 5-year low of the Global dry bulk fleet speed is an interesting phenomenon experienced during the COVID-19 pandemic, Figure 2 also clearly illustrates the result of the recent surge of Capesize rates and the associated, spectacular rise in Capesize fleet speed. We will leave exploring this speed rise to a different blog post.
Our Fleet Speed tool is part of the Oceanbolt Data platform. If you are interested to learn more about what we can offer to you or if you want to try our product, please get in touch by following this link or send an email to email@example.com.