Weak demand in dry bulk shipping is likely to plague the sector for quite some time, but other factors give reason to mild optimism about the outlook, according to shipping analysts.

"The market conditions are devastating and volume growth in 2015 on key trades is negative. The lack of coal imports into China is taking centre stage, and lost volumes are difficult to make up elsewhere. The (still) positive iron ore demand is overshadowed in significance as the negative coal market makes headlines," said Peter Sand, chief shipping analyst at BUMCO in Denmark.

Coal imports to China fell by 38% from a year earlier in the first four months of 2014 and despite very low freight rates, the landed cost of imported coal does not favour the trade.

However, limited fleet growth offers the sector some comfort. "Since the turn of the year, the dry bulk fleet as a whole has only grown by 0.5% and since early February, the fleet has not grown at all. This has happened as the demolished volumes have matched the number for newbuildings being delivered," said Sand.
Another positive development is found on the contracting side. "Thirty five new orders have been placed at global shipyards so far this year - seven Panamaxes, 12 Handymaxes, 16 Handysizes, and no Capesizes have been added to the order book, which now stands at 1,750 ships with a combined capacity of 142 million dwt," he pointed out in a market report.

Erik Nikolai Stavseth and Kurt Waldeland, shipping analysts at Arctic in Oslo, said that from an investor point of view, the so far very disappointing dry bulk business is starting to offer certain attractive opportunities.

"Although we have been positive on dry bulk from the previous peak through today, we argue that this is an opportune time to invest in dry bulk. However, the investment must be cash-only with focus on secondhand tonnage," the two analysts said in a market report.

"At this point we go for quality over speculative plays and prefer GOGL (Golden Ocean Group; expensive on NAV, but loaded with cash) or DNORD (DS Norden; always cheap on NAV, but quality across the board). SBLK (Star Bulk) also has a decent balance sheet now, which gives runway to mid-16 on current abysmal rates," they said.