Shipping rates for vessels transporting commodities such as coal, iron ore and grains racked up impressive gains in the first quarter of 2016 after hitting record lows, but the rally could flatten out into the second half of this year as the macroeconomic outlook remains uncertain, the latest forecasts show from IHS Inc.

The latest forecasts from the new IHS Dry Bulk Freight Rate Forecast service factors in key variables and fundamental drivers that affect future freight rates, such as ship availability, ship utilization, macroeconomic developments, oil market fundamentals, trade data, bond yields, short- and long-term interest rates, exchange rates and commodity prices and production.

“Short-lived rebounds will bring occasional relief to the market,” said Luciana Salles, principal trade analyst at IHS Maritime & Trade. “Many questions remain, however, as to when the current situation in the dry bulk markets will give rise to more sustainable rates on the whole, and whether the overall macroeconomic situation and the fundamental drivers can engender enough confidence to see a price recovery for a more prolonged period of time.”

After being subdued since 2014, the dry bulk market will face a transitional year in 2017, IHS predicts, as demand will finally outpace supply on the back of calmer financial markets that could reinforce a more stable outlook for global growth. At present, US economic growth is expected to accelerate a little moving through 2016, led by consumer spending and homebuilding, while growth in the Eurozone growth will improve slightly aided by further monetary stimulus.

For 2016, IHS estimates world GDP growth to reach 2.6 percent with real export growth of 2.8 percent. Then in 2017, IHS forecasts 3.1 percent for world GDP growth with 4.4 percent export growth followed by 2018 with 3.2 percent growth and 4.3 percent in exports.

“Freight rates could start to feel the effects of a more balanced market from 2018 onwards if the growth outlook for the world economy is sustained,” Salles said. “Meanwhile, we can expect episodic volatility – much like the one we are in now – as supply and demand variables get worked out by the natural order of the markets.”

While the usual recessionary triggers – asset bubbles, policy tightening and oil-price shocks – have abated for the global economy, China remains a risk where imbalances in credit, housing and industrial markets could lead to a further slowdown while it re-engineers itself from an export, investment-led economy towards a service-led one. Riskier still are the upcoming European referendum, stagnation in the emerging markets, and conflicts in the Middle East and Africa, any one of which can profoundly impact dry bulk demand should the worst happen, IHS said.

As for global trade, IHS forecasts compounded growth rates to fall from 4 percent to 2.5 percent from 2015 to 2020 when compared to the previous five years. Such a drop will be mainly influenced by sluggish demand growth in 2016, which will be compensated in the following years when demand growth is expected to average 3.3 percent in 2018-2020.

The shipping industry, particularly dry bulk, is prone to cyclicality, Salles noted. “To presume that all cycles are the same is going to prove a very expensive mistake,” she said. “The dry bulk trade has thrived for the past five decades when global exports consistently exceeded GDP growth. Given the current market conjecture and our macroeconomic predictions, it is clear that the era of rapid globalized-driven growth in world trade is over and will give way to moderate growth for many years to come.”