Shipping rates are expected to see major improvement from the end of next the quarter onwards thanks to improving global economies, benefiting Thailand's major dry-bulk carriers such as Precious Shipping Plc (PSL), say senior executives.
Managing director Khalid Hashim also said the shipping rate should improve after industry seasonality ends.
"Chinese New Year, the 'January effect' and weather patterns are three reasons that cause the Baltic Dry Index (BDI) to fall at the start of each year and then bounce back equally sharply by the end of the first quarter," he said.
The BDI, published daily by the London-based Baltic Exchange, assesses the price of shipping major commodities such as coal, iron and grain by sea based on shipping demand against the supply of dry-bulk carriers.
The Baltic Exchange is the world's only independent source of maritime market information for the trading and settlement of physical and derivatives contracts.
China, the world's leading importer of coal and iron for power and steel production, completed all of its purchases of raw materials the previous year.
February will see production resume and normal pattern continue, said Mr Hashim.
Shipowners normally tend to register new ships in January instead of December in the previous year.
This explains why the supply of ships increases in the first month of each year, pushing a decline in the BDI.
Storms and hurricanes usually shut down operations at Australia's main iron ore and coal ports as well as in Brazil, another major supplier of iron ore to China.
The weather pattern has become more severe and unpredictable, affecting shipping early in the year.
"If 2014 follows the normal seasonal pattern, the BDI should move up nicely in the second quarter," Mr Hashim said, adding that seasonal downturn normally returns in the third quarter before the seasonal upturn returns in the fourth quarter.
Normally, grain shipments stop in the third quarter and resume in early October.
Grain movement accounts for 12% of total annual dry bulk demand and is spread over only nine months in the year, said Mr Hashim.
He said the fourth quarter sees the resumption of grain shipments as power demand increases for the winter in the Northern Hemisphere.
Jaroonpan Wattanawong, a transport analyst at Maybank Kim Eng (Thailand), said PSL will likely see improved performance this year from the last year's fourth quarter as the global economy begins to recover.
"PSL has operated with a loss due to freight charges of around US$7,000, which is below the company's break-even point of $7,500. We expect the freight charge could reach as high as $10,000 later this year," he said.
About 85% of PSL business is in the spot market, meaning the price fluctuates based on the market rate, said Mr Jaroonpan.
"Over the last couple of years, the shipping industry has been relying on China as other economies slowed. But in 2014, the US, Europe and Japan are showing signs of improvement, and so are the shipping demands in these countries," Mr Jaroonpan said.
"Dry-bulk carriers have been oversupplied in the last several years, and 2014 will be the first year that the supply of ships will match the demand for commodities."
Furthermore, increases in ship construction costs and supply indicates that shipping companies are confident the global economy will improve, Mr Jaroonpan said.
The BDI opened on Jan 2 at 2,113 points, up from 698 on the same date last year. Mr Jaroonpan expects the BDI will average about 2,000 points this year, up from last year's average of 1,068.
Shares of PSL closed unchanged Friday on the Stock Exchange of Thailand at 20 baht in trade worth 7.53 million baht.