Dry Bulk Shipping At a Glance


The bulk shipping business predates the containerized shipping industry. Before the standardized container is invented, there are only bulk vessels roaming the 7 seas.

Within a span of 50 odd years, we have rapidly upgraded international ports of the world with gantry cranes, stacking cranes, straddle carriers and reach stackers. Besides, they are building it to be bigger, faster, stronger to accommodate the behemoth vessel size today.

The bulk shipping industry, however, is not eliminated entirely. 30% of global sea trades are transported using bulk ships. Bulk carriers are more prominent now than ever.

In the realm of bulk shipping, they are specialists in transporting raw materials or commodities. The uniformity of these raw materials makes it more logical to charter a specialized ship to transport such goods.

We are looking at oil, corn, iron ore, steel ores and the like. Dense cargos with a commercial value so high and quantity so much, that it warrants chartering its own vessel.

Where every other commodity travel economy class in containers like sheep, these raw material travel in their own private jets.

Let’s dive deep into the bulk shipping industry and glance at its massive contribution to the world’s economic engine. Hopefully, to gain a bit of appreciation to the much-underappreciated side of modern consumerism.

Baltic Dry Index

We describe the Baltic Dry Index with no less enthusiasm than the standard Wikipedia page.

But peering into the Baltic Dry Index (BDI) sheds some light on what investors look at in investing in dry bulk shipping, and therefore understanding what is observed and the historical nature of the dry bulk industry.

The BDI, in essence, gauges the demand and supply for the dry bulk carriers. How it is measured, is by weighing in the shipbroker’s assessment of current bulk freight cost.

BDI Index, Source: Bloomberg Market

The key takeaway of the BDI index is that it assesses two variables

  1. The shipping routes.
  2. The vessel sizes.

The higher the indication of the BDI index the higher the demand for bulk vessel charters, therefore a higher freight rate.

Conversely, a lower indication of the BDI index signifies the lower demand for bulk vessel charters, therefore a lower freight rate.

The economics of supply and demand dictates that the market always course corrects itself. Higher freight rate may indicate good economic times or a shortage of bulk vessels currently in the market for charter.

On the flip side, lower freight rate may indicate an economic downturn or an oversupply of bulk vessel charters.

In the long term, the market always readjusts itself.

Since the BDI tracks shipping routes and vessel size’s freight rate. It stands to reason that these two has a strong influence on the overall freight rates.

Dry Bulk Commodities

The Top Major Bulk Cargos transported are: –

  1. Iron Ore
  2. Coal
  3. Grain

The Top Minor Bulk Cargos transported are: –

  1. Agribulk
  2. Sugar
  3. Fertilizer
  4. Metal and Mineral
  5. Steel and Forest Products
Grain Loading, Source: world-grain.com

Major bulk cargos are transported in larger vessel fleets whereas the minor bulk cargos are transported in smaller ships. Minor bulk cargos are typically transported in Handymax or Supramax bulkers.

The top coal exporters according to worldcoal.org are Indonesia, Australia, Russia, United States and Colombia.

Coal is not only used as an energy source, but it is also mixed with cement, and also used in steel production as well. So, you can see why despite having a large environmental impact, we are still heavily reliant of the coal as a raw material

The other traded goods are self-explanatory. As we mentioned, the high dependency on those commodities buoys the bulk shipping industry for a foreseeable future.

Types of Bulk Cargo Ships

Dry bulk vessel capacity is identifiable by the name it is given. There are many more vessel sizes but these are the 3 most common. To a point where the Baltic Dry Index only monitors these 3 vessel sizes.

Vessel Types Capacity (DWT)
Capesize 156,000 – 400,000
Panamax 65,000 – 80,000
Supramax 50,000 – 60,000

Supramax is also commonly known as Handymax, the naming convention of all these vessels are quite intuitive, a Handymax comes in a handy size, it is small enough to go through canals and deep rivers and have a capacity of up to 60,000 Dead Weight Ton.

There are perks of utilizing small vessels, primarily charterers benefit from its manoeuvrability and ability to accommodate smaller ports in more rural locations.

Panamax, intuitively speaking again, are the maximum capacity vessels that the Panama Canal can accommodate. Briefly speaking, the Panama-canal is a shortcut built to link the Atlantic and Pacific Ocean, it saves over 3,500 nautical miles, or 6,500 kilometres. Panamax vessels are in between 65,000 to 80,000 DWT. To Segway, other vessel names like “Malaccamax” and “Suezmax” also indicates its capacity to charter through the Malacca Straits and Suez Canal respectively

Capesize, the largest category of vessels is not able to pass either the Suez Canal or the Panama Canal. They have to go through the long route along the “Cape of Good Hope”, hence the name Capesize.

Logically speaking, the cost-benefit of the profit from the additional capacity and freight charge a Capesize vessel can earn will surely outweigh the setback of the longer transit time and the fuel cost of the Cape of Good Hope sail-around.

Business Structure of Bulk Shipping

To distill the business aspect, we need only look at the three aspects of the bulk shipping business, perhaps similarly to any other business type.

  1. Revenue Source
  2. Cost Structure
  3. Financing Resources

The ship revenue is highly dependent on the current fleet capacity, the bigger the capacity, the higher revenue opportunity a business company possesses, however it also exposes the business to economic factors that may hamper the demand in the short term.

The delicate balance for a well-run shipping company is to justify the financing expense of purchasing newer, higher capacity and more efficient vessels, with the likelihood of the increase in demand for vessel charters.

Cost Structure

There is the operating cost that is variable to the number of charters contracted, which are the crew cost, repairs, maintenance, insurance, administration and also the bunker fuel costs.

More than that, any outsourced resources such as the port facility costs can also make or break a shipping company. A good relationship between he vessel owner and the port operators may guarantee good credit facilities that delays outstanding payables.

Financing Resources

Most vessels are financed by debt, which has a schedule of capital repayment that the operator is obliged to pay regardless of market condition.

The One Factor affecting Bulk Shipping

This can be an entire blog post on its own. The maritime economy is complicated and intertwined with many factors. One small mishap can set-off a domino effect of disrupting the market economy, and consequentially the entire bulk shipping industry. One uncontrolled pandemic outbreak may shock the economy back to the Great Depression.

However, we believe that there is only one prominent factor that explains most of the variables affecting the bulk shipping industry, which is the global demand for the underlying raw material transported.

Think about it, every other auxiliary factor is directly correlated to the demand of the commodity.

Are we facing an economic recession? Does it affect the demand of iron ore? If yes, bulk shipping market is affected.

Are we facing a currency value drop? Does it affect the demand of Sugar? If yes, bulk shipping market is affected.

Is the global reserve of oil depleting? Does it affect the demand of oil? If yes, bulk shipping is affected.

The supply side of the industry is, in our opinion, very much dependant on the demand of raw materials. So, if one day the Panama Canal chooses to cease operation, as long as the demand for the raw material is still buoyant, the shipping industry will be fine.


To summarize, the dry bulk shipping industry is fascinating.

What is covered in this blog post is merely the tip of the tip, of the tip of the iceberg.

It is an ironic industry, we are so dependant on this industry that it is very resilient, but it is also a very fragile ecosystem that one small change in the industry will have a massive ripple effect.

We had fun exploring the dry bulk shipping industry briefly, and we look forward to providing more content for your viewing pleasure.









Hello! I'm Kelvin, I work as a custom broker and I'm thrilled with having the experience to share my industry knowledge with you. I hope that you enjoy reading them as much as I do posting them.

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