- 1 - points on 14 March, driven by increases in the Panamax and geared vessels market. However, this is still 80 points below the level at the start of 2016.
Strong grain exports from South America have helped average Panamax earnings climb to the highest level since mid-November 2015 at $3,861/day, however, to put this in perspective, this is still over $800/day below the year-ago level. This weakness can be partly attributed to the sustained growth in the 60,000-64,999 dwt Ultramax fleet, but also to weakness in seaborne coal trade. There have been similar increases in the 52,000 dwt Supramax and 28,000 dwt Handysize 6 TC averages to $4,461/day and $3,750/day, respectively.
Although earnings for the smaller vessels have improved, the Capesize (180k dwt) 5 TC average has continued to fall, dropping to a new all-time low of $2,158/day on 14 March. Losses have been concentrated in the Atlantic with the round-voyage rate slipping below $2,000/day. After rising slightly at the end of February, the Capesize one-year period rate has since retreated to a record low of a mere $5,250/day. The Gladstone-Japan Capesize coal rate has edged up to $3.20/t.
Dry Bulk Trade Developments
The main focus of the dry bulk market over the past month has been the main South American grain export season, with SSY expecting a record quarter for regional grain exports in the 2q16 due to the availability of competitively priced soyabeans. In addition, Brazil exported an unseasonally high 5.4 Mt of corn in February, up 4.3 Mt year-on-year and the third-highest month on record. Elevated grain exports have been accompanied by port congestion. The number of Panamaxes waiting to load grain cargoes at Brazilian ports climbed to the highest level since 2013 on 10 March at around 100 vessels, according to local sources. This is more than double the year-ago level of 40 vessels, and compares with 83 vessels at the same point in 2014.
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slumped to a three-month low of 2.1 Mt in January, chiefly to the detriment of Capesize and Panamax demand.
In the first two months of the year Chinese imports of iron ore totalled 155.8 Mt, which marks a year-on-year gain of almost 9 Mt at a time when China’s crude steel production fell 5.7%. This highlights the role played by import substitution in generating iron ore import growth into China, with domestic ore being displaced from the market.
A compensation agreement between Samarco and Brazilian authorities raises the prospect of increased Brazilian iron ore exports towards the end of the year with the company aiming for a partial restart iron ore pellet production in the 4q16. Samarco advises that output for the first 2-3 years after restart
would “likely” be 19 Mtpa, as opposed to the 30.5 Mtpa of pellet production
capacity achieved prior to November’s dam failure.
Fleet Supply Developments
The pace of fleet growth slowed in February as newbuilding deliveries retreated from the three-year high recorded in January and demolition interest remained high in the face of average charter rates remaining below vessel operating costs in all dry bulk carrier sectors.
Much of this year’s scrapping activity has been concentrated in the Capesize
and Panamax fleets. Panamax deletions recorded a third successive monthly all-time high (of 20 vessels) in February, with 10 Capesize vessels removed from service, the highest total since May 2015. This contributed to deletions across the entire dry bulk carrier fleet reaching a nine-month high of 3.9 Mdwt in February.
Turning to newbuilding deliveries, the 4.8 Mdwt of newbuild capacity added last month marked a sharp slowdown from January’s 8.6 Mdwt. Significantly, however, the January/February combined total is higher than the corresponding figure for 2015. The rate of non-delivery from the scheduled orderbook remains an area of uncertainty, but the year-on-year increase in deliveries underlines the scale of this year’s newbuilding delivery programme.
As mentioned earlier, net growth has been fastest in percentage terms in the 40,000-64,999 dwt Handymax fleet where deliveries of 60,000-64,999 dwt Ultramax designs dominate. As a result of these developments, net fleet
expansion slowed from January’s 12-month high of 4.8 Mdwt to 0.9 Mdwt in
February.
Despite frequent reports of intensifying interest dry bulk carriers entering lay-up, SSY estimates less than 1% of the bulker fleet is in full lay-up worldwide at present.
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The Panamax freight futures (FFA) market has seen contract prices increase in tandem with the small improvements in the spot physical market. The March-December 2016 contract price for the Panamax 4 TC average was trading around $4,800/day on 14 March. However, this is still below where it was at the start of the year. The Mar-Dec contract price for the Capesize (172k dwt) 4 TC average was priced at $5,150/day.
SSY Consultancy & Research 15 March 2016
