Dry bulk ship owners will need to idle or demolish their ships to tide over excess capacity that has sent freight rate plunging, a maritime research analyst said Tuesday.
The dry bulk sector's woes have been simmering for the last seven years although demand had held up relatively well until 2013-2014. The recent slowdown in China has exacerbated overcapacity currently estimated at 30 percent, said Rahul Kapoor, director of equity research at Drewry Financial Research Services.
"It's a toxic combination of negative demand growth and excess supply," Kapoor told CNBC.
Freight rates have collapsed as growth in China slows, reducing the country's appetite for commodities just as a backlog of large vessels come into service.
Key shipping indicator Baltic Dry Index has been breaching fresh record lows and is down almost 100 percent at 316 since reaching a peak of 11,793 in May 2008. The BDI is a measure of freight rates for shipping dry bulk cargoes such as iron ore, coal and grains.