- 1 - points in early February to 597 points on 14 April, as average vessel earnings across the four dry bulk carrier sizes reached year-to-date highs. Even though this marks the first time in 2016 that the BDI has risen above the year-ago level, vessel earnings remain depressed by historical standards. The 1q16 average for the BDI of 358 points was the lowest quarterly average since the BDI inception in 1985, and remains short of last year’s annual average of 718.
Average earnings for 180k dwt Capesizes 5 TC average reached climbed to the highest level of 2016 at $6,184/day, a sudden gain from $2,518/day just two weeks earlier. The rising spot market has fed through to the period market with the Cape one-year period rate climbing to $6,500/day, up $1,250/day month-on-month, although this compares with a year-ago level of $10,000/day.
At $5,577/day, Panamax average earnings also stand at a 2016-high, chiefly thanks to the Panamax Atlantic round voyage climbing to a seven-month high of $7,027/day from $4,173/day at the beginning of March. The Atlantic round voyage is now at a premium of over $2,300/day to its Pacific equivalent.
Average earnings for Supramax vessels of 52,000 dwt have climbed to $5,374/day. As with the Panamax market, rate gains have been most apparent in the Atlantic basin. The Indonesia-East Coast India S8 route assessed by the Baltic Exchange has risen to $4,497/day, another 2016-high.
Dry Bulk Trade Developments
Trade data show iron ore trade volumes were already strong before an upturn in chartering supported the rise in Capes at the start of April. Australian iron ore exports have demonstrated growth in the first two months of the year while exports from Australia’s largest iron ore terminal of Port Hedland climbed to a monthly all-time high of 39.5 Mt in March, up 8% year-on-year. Iron ore export data from the Brazilian government indicate a substantial gain
in this year’s shipments. The 1q16 total of 85.3 Mt is up 6.0 Mt on the 1q15.
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Dynamics Chinese domestic price for hot rolled band surging to a twelve-month high of $352/t in April. This over $100/t higher than the mid-February price.
Panamax and Supramax demand continues to be driven by strong South American grain exports, with a record 2q in prospect. Brazil’s exports of soya and corn combined surged to a record 11.9 Mt in March, up 56% year-on-year, as soya shipments rose to an eight-month high of 9.9 Mt.
However, the boost to earnings from the grain trade continues to be tempered by coal trade developments. Panamax demand in the Atlantic has been impacted by the ongoing falls in US coal exports (excluding Canadian cargoes), which declined by a third to 3.9 Mt in February, as steam coal exports slumped to a six-year low. UK coal imports fell 2.2 Mt year-on-year to 1.0 Mt in February, the second lowest month in the last 16 years. After three strong months for exports, Colombian steam coal exports fell in March, although shipments to Asia rose to a near four-year high of 0.8 Mt on increased exports to India, a significant boost to tonne-mile demand.
Geared vessel demand in the Pacific has suffered from the Malaysian bauxite mining ban in place since January. China imported 24 Mt of bauxite from Malaysia last year, but only stockpiled ore is currently being shipped. Furthermore, the start of 2016 saw a slowing in the previously strong global steel trade with combined shipments from China, Japan, South Korea, the EU and Brazil in the 1q16 estimated to be the lowest quarterly total since the 1q15.
Fleet Supply Developments
Net fleet growth across the dry bulk fleet slowed to the lowest level since December 2015 in March at under 0.1 Mdwt as demolition activity countered newbuilding additions. Last month also saw the second-highest month for Capesize deletions on record with 15 vessels (2.7 Mdwt) scrapped, with an additional 19 vessels yet to arrive at the demolition yard. A further 16 Panamax vessels (1.1 Mdwt) were removed from the fleet last month, continuing the robust pace seen since December.
Net fleet growth was strongest in the Handymax/Supramax fleet of 40,000-64,999 dwt, primarily as a result of the high arrivals of new Ultramax designs of 60,000-64,999 dwt. Consequently, the Handymax/Supramax fleet has expanded by 1.7% since the start of 2016, with Handysize net fleet growth at 1.1%. The Panamax fleet has witnessed zero growth, with Capesize net expansion at 0.6%.
Market Outlook – Freight Futures
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contract price for the Capesize (172k dwt) was trading at around $7,400/day on 14 April, up from around $5,600/day on 17 March when Capesize physical spot earnings were at an all-time low. There has been a smaller increase in the equivalent contract for the Panamax 4 TC average which has risen to near $5,600/day.
SSY Consultancy & Research 15 April 2016
