‘The Models Are Obsolete’: Dry Bulk Leaders Warn That Stacking Crises Have Broken Traditional Risk Playbooks

Estimated reading time: 4 minutes

Western Bulk, Nova Marine Carriers, Drydel Shipping, and Paratus executives told the Geneva Dry conference last week that the accumulation of geopolitical and operational shocks since 2008 has rendered conventional shipping risk models unreliable, forcing operators to shrink fleets, diversify assets, and rethink how they deploy capital.

The panel, one of the most direct exchanges at this year’s event, laid bare an industry grappling with a world where disruptions once considered extraordinary now arrive in clusters, compounding each other in ways that standard probability models were never designed to capture.

Moderator Jason Martinet of Triton Bulk opened by polling the room: roughly a third of attendees acknowledged holding live freight exposure across time charters, cargo books, ship equity, or bunker positions. He then listed the sequence of shocks that has reshaped commercial thinking: the Brumadinho dam collapse, the pandemic, Panama Canal drought restrictions, Houthi attacks on Suez traffic, USTR trade measures, and the closure of the Strait of Hormuz.

“What used to be black swans are really now a flock of swans,” Martinet said. “A pattern that happens quite often.”

Torbjørn Gjervik, CEO of Western Bulk, said the company had responded by deliberately cutting its operated fleet from roughly 140 to 150 vessels down to between 110 and 115. Volume fell, but margin per trade rose. “More cautious, a bit more selective, basically trying to find where we think the risk reward is good enough to participate,” he said.

Vincenzo Romeo, CEO of Nova Marine Carriers, described a different hedge: expanding from pure ship-owning into operating, creating a natural buffer. With one vessel currently stuck on the wrong side of Hormuz, Romeo credited diversification across vessel sizes, from 4,500 dwt coasters to kamsarmaxes, with providing resilience.

Costas Delaportas, CEO of Drydel Shipping, reported a vessel trapped in the Persian Gulf for two months. Beyond daily crew welfare concerns, Drydel offered its charterer the option to use the stranded ship as floating storage. “We gave them this flexibility, which is very important during these difficult times,” he said.

Delaportas also made an unprompted call for the International Maritime Organization to mandate slow steaming across the global fleet amid the bunker shortage. “Imagine how much fuel we can save if all owners in this world go slow steaming during this difficult period.”

Gus Majed, group CEO of Paratus, delivered what was arguably the session’s sharpest warning. His firm estimates that global oil stocks will have drawn down by approximately 1.2 billion barrels by year-end, with the physical procurement crunch only beginning to bite in the next two months. “It is not so much what is the price. It is the availability,” he said.

On risk models, Majed left no room for ambiguity. “Not only do they no longer work. They are completely and fundamentally obsolete.” The old assumptions of log normal distributions and mean reversion, he argued, have been overtaken by fat tails and correlated extremes. “All these risks are no longer independent. They are cross correlated and there’s a sequence between them, a knock on effect.”

Karen Taylor, head of industrial commodities at ADM Investor Services, confirmed that clearing houses are adapting. “We accept that the models do break, and right now they break more frequently and more fundamentally than previously.” Her team stress tests client positions against both historical and hypothetical extremes, applying increasingly conservative margining.

Gjervik and Majed agreed that algorithmic macro traders have injected both volatility and opportunity, but exploiting dislocations requires new capabilities. “You might need people from a totally different background compared to your usual chartering manager,” Gjervik noted.

Delaportas said vessel investment decisions have shifted away from the old scrap value calculation toward fuel efficiency and consumption. Drydel has ordered more than 25 newbuildings at Japanese yards over the past decade. “All the charterers want to fix efficient vessels and I’m very glad we have done it.”

Romeo closed with a principle he said Nova’s founding family has followed for 45 years: retain earnings in the company rather than distributing them to shareholders. “The best deals are made when the market is low, and you have to be ready to buy. Whenever you have good years, it’s better to have a rich company and a good balance sheet, rather than a rich shareholder and a poor company.”

Martinet summed up the consensus: in a market where exceptional events have become routine, the edge belongs to those with the deepest pockets, the most diversified portfolios, and the discipline to outlast forced sellers.