Bulk Vessel Fleet
Bulk Vessel Types and Capacity
The global capacity of the dry bulk fleet is determined by the number of vessels in the market and their cargo carrying capacity, measured in deadweight tonnage. As of December 2020, the total dry bulk vessel operating fleet was 12,312 vessels, with a cargo capacity of 912.2 million deadweight tons (dwt), according to Drewry Shipping Consultants Ltd. Bulk vessels are identified by size in the following categories since April 2020 (see figures below):
- Small Handy (10,000-24,999 dwt)
- Mid-size Handy (25,000-34,999 dwt)
- Large Handy (35,000-39,999)
- Cement Carrier (Cement capable)
- Handymax (40,000-49,999 dwt)
- Traditional Supramax vessel (50,000-60,000 dwt)
- Ultramax (60,000-69,999 dwt)
- Traditional Panamax vessel (60,000-78,999 dwt)
- Post-Panamax vessel (79,000-99,999 dwt)
- Kamsarmax (79,000-99,999 dwt)
- Mini Capesize vessel (100,000-129,999 dwt)
- Standard Capesize vessel (130,000-199,999 dwt)
- Large Capesize vessel (200,000+ dwt)
- Very large ore carrier (Vloc) (200, 000+ dwt)
Prior to April 2020, bulk vessels were categorized as:
- Handysize vessel (10,000-40,000 dwt)
- Handymax/Supramax vessel (40,000-65,000 dwt)
- Panamax vessel (65,000-85,000 dwt)
- Post-Panamax vessel (85,000-120,000 dwt)
- Capesize vessel (120,000-220,000 dwt)
- Very large ore carrier (Vloc) (220,000+ dwt)
The most commonly used bulk vessel categories in transporting grain are Panamax and Handysize. Although the expanded Panama Canal can accommodate larger bulk vessels, Panamax vessels are the most commonly used vessels to transport grain from the United States to markets in Asia. Prior to the canal expansion completed in 2016, typical grain shipments from the United States to Asia through the canal were about 52,000 to 54,000 metric tons (mt). After the expansion, the typical shipments ranged from 60,000 to 66,000 mt, providing increased economies of scale.
Handysize vessels are frequently used to transport grain from the Great Lakes to ports situated in shallow waters or on other lower-volume trade routes.
The capacity of the world fleet depends on fleet performance, ship building, and ship scrapping activities. The addition of new vessels to the fleet increases the supply, and the retirement or scrapping of older vessels diminishes it. Fleet performance is influenced by vessel traffic congestion at major ports, vessel operating speed, occurrence of vessel breakdowns, and other factors.
In general, the total dry bulk fleet size and capacity have increased over time, especially during the period following the 2008 Summer Olympics in China (see figure below). There was infrastructural expansion by China in preparation for the Olympics in Beijing. This increased global shipments of bulk commodities, especially coal and iron ore during these periods, leading to higher ocean freight rates. The higher ocean freight rates encouraged ship owners to order new vessels. Most of the increase in vessel fleet size and capacity is dominated by Handymax/Supramax, Panamax, and Capesize (see figure below).
Ocean Freight Rates
Bulk ocean freight rates are volatile, at least in the short run, since the total supply of vessel space is relatively inelastic in that time frame. While it may take a long time for a newly ordered vessel to be delivered, the demand for vessel capacity can vary greatly during that time. Ocean freight rates for shipping bulk grain and other agricultural products, such as forest products, are determined in competition with the shipments of other bulk commodities such as coal, iron ore, steel, cement, fertilizer, sugar, and salt.
The graph below shows the relationship between Panamax vessel fleet size and ocean freight rates for shipping grain over time.
The number of Panamax vessels was relatively stable prior to 2007, but higher ocean freight rates from 2004 to 2008 encouraged vessel owners to order more newly-built vessels. Rates increased in this period due to increased global shipments of bulk commodities, especially coal and iron ore, and infrastructural expansion by China in preparation for the 2008 Summer Olympics. However, the freight market was not immune to the global economic crisis, and rates returned to pre-2004 levels in 2009. In 2010, rates increased briefly as the global economy recovered slightly from the economic recession.
However, the delivery of new vessels—ordered during the period of higher ocean freight rates between 2004 and 2008—led to excess vessel supply in the bulk shipping market, causing bulk ocean freight rates to remain historically low through 2016. The graph below shows the bulk vessel deliveries over tine in million deadweight tons. A typical cargo vessel takes an average of 3 years or little longer to build, depending on various factors. The graph below shows spikes in total deliveries of new bulk vessels in 2013 and 2017.
Panamax is the typical vessel used to carry grain, especially from the United States to Asia. The graph below shows the relationship between the delivery of newly built Panamax vessels and ocean freight rates for shipping grain. An increase in rate of new vessel deliveries compared to retirement or scrapping of older vessels will increase vessel supply, which will consequently lower the ocean freight rates as explained above. The causation-effect relationship between rate of vessel deliveries and bulk ocean freight rates is illustrated in the graph below. It appears that deliveries of newly built vessels tend to be high when the ocean freight rates are high and vice-versa. The ship owners tend to be more optimistic during the economic boom and high ocean freight rates and thus, are more eager to order newly built vessel. The converse is usually true during a recession or low ocean freight rates, culminating in low rate of vessel deliveries.