Bulker values will be cut by one fifth as a deluge of newbuildings hit a market scarred by the near collapse of Korea Line Corp, a top analyst warns.

Erik Nikolai Stavseth, an analyst at Arctic Securities, said: "Asset prices are set to come down by 20%. Secondhand tonnage is trading at a premium to newbuilding parity; a situation we expect to turn into a discount as wave upon wave of vessels are delivered from shipyards.

"Based on our freight rate forecast, we see downside to asset prices as returns on current long-term charters does not defend current prices.

"Assuming a smaller drop in newbuilding prices on the back of increase steel and wage costs, we think vessel prices are set to come down to levels seen before 2003."

Stavseth's prediction is based on the expectation capesize rates will tip the scales at just $15,000 per day in 2011. Panamax bulkers will command only $12,000 per day, he says.

Stavseth says the lower rates will spur scrapping to heights not seen since the mid-1980s. At the same time 30% of newbuildings are tipped to disappear.

"However," he said, "based on our modest growth outlook for the Chinese steel industry and thus limited demand for iron ore and a slower growth in ton-mile demand, we do not see the supply-demand balance bottoming out before 2012 as the industry works off the growing tonnage overhang."

Clarkson Research Services estimates the bulk carrier orderbook at 3,198 vessels including 631 capesize vessels above 100,000 dwt totalling 23m dwt, and 946 panamax vessels of 60,00dwt-100,000 dwt, totalling 76m dwt.

The dry bulk fleet grew by 14.8% in 2010, reaching 527m dwt with 10.8 m dwt delivered this year, Arctic Securities said.

This equalled more than 90m dwt when annualised but what would be delivered from shipyards was uncertain over the next two years. Arctic forecast 75m dwt in bulk carriers to be delivered in 2011 and 33m dwt scrapped, resulting in a net fleet growth of 8.5%.

In 2010 bulk carriers totalling 5.7m dwt were scrapped and 10.4m dwt in 2009, according to Clarksons.