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ICMA
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Freight Market Report
(15 October 2015)
Some Capesize Volatility But Freight Markets Largely
Subdued
Freight Market Overview
The last month saw another short-lived burst of volatility in the Capesize market, with the average of the 5 TCs (180k dwt) jumping around $6,600/day in just three trading days in late September to $15,295/day. The Capesize average subsequently succumbed to downward pressure in early October and had sunk to $10,191/day by 14 October. Over the same period the Gladstone-Japan spot voyage rate jumped from $6.50/t to almost $8/t at the beginning of October, before retreating to $6.60/t by time of writing.
Weak demand has most negatively impacted the Panamax market in the Atlantic, where Round Voyage rates assessed by the Baltic Exchange dwindled to below their Pacific equivalent and to less than $5,000/day for a spell in early October (from more than $11,000/day in August). Some upward momentum returned this week. With the Pacific Round Voyage rate ranging between $6,000-6,7000/day, the Panamax 4 TC average has been subdued during the past month as a consequence, hovering around the $6,000/day mark.
Geared vessel earnings have been on a gradual downward trajectory. Supramax average earnings (52k dwt vessels) slid below $7,000/day on 9 October for first time in four months, while the corresponding average for Handysizes (28k dwt basis) was around $5,500/day on 14 October, marking a monthly decrease of roughly $1,000/day.
Dry Bulk Trade Developments
Last month’s firming in Capesize rates was accompanied by increased iron ore shipments. Exports from Brazil climbed to a year-to-date high of 35.6 Mt in September, while last month’s record iron ore throughput at Port Hedland of 39.4 Mt indicates either a monthly all-time high or at the very least a robust month for Australian iron ore exports in September. In the same month Chinese imports attained a year-to-date high of 86.12 Mt.
Such strong trade data for iron ore contrasts with the picture for coal. US coal exports, at 5.3 Mt in August, were down 1.2 Mt year-on-year and also marked the 22nd successive month of annual decline. Meanwhile, Chinese imports in January-September were down 67 Mt yr-on-yr. Such weak trade numbers highlight the importance of grain stems to the Panamax market.
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May, June and July this year. The seasonal downturn in grain cargoes from Brazil has contributed to downward pressure on Atlantic rates in both the Panamax and Supramax sectors, which has not been alleviated by a counter-seasonal build-up of port congestion at Brazil’s grain terminals. According to local sources used by SSY, the number of Panamaxes with designated grain cargoes (mainly corn and soyameal at present) waiting to load has risen to more than 80, contrasting with a count of just eight at this point last year. US Department of Agriculture data from end-September show the US grain export season was yet to enter full swing at that point.
Steel products trade is on course for a record year, assisted by competitively priced steel from China shipped overseas. As a consequence, the surfeit of Chinese steel (PRC exports reached an all-time high of 11.3 Mt in last month) has put local industries in importer markets under pressure, creating the prospect of the first simultaneous expansion in annual world seaborne trade in steel products and contraction in annual global crude steel production since the 1990s.
Fleet Supply Developments
September proved to be the highest month for dry bulk carrier newbuilding deliveries since January (traditionally a strong month for newbuildings). In the first nine months of 2015 deliveries across the whole bulker fleet totalled 40.4 Mdwt, which is very close to the total for the same period of 2014, just 2.8% higher. There are noticeable variations in the rates of growth across the bulker sectors, however. The large number of new Ultramax designs (chiefly of 60,000-64,999 dwt) has swelled additions to the 40,000-64,999 dwt Handymax fleet to 12.3 Mdwt, up a remarkable 45% on last year’s pace. Deliveries of both Panamaxes and Capesizes on the other hand are running behind the 2014 pace, by 23% and 9% in dwt terms, respectively.
With demolition activity in the 3q15 at its lowest quarterly level since 2010, net fleet expansion in the 3q jumped to 9.9 Mdwt as a result. This represents the fastest quarter of growth since the 1q14 and adds pressure to supply:demand balances. That said, intense interest in scrapping in the 1h still means that some 12.0 Mdwt of capacity has been removed from the dry bulk carrier fleet in the first nine months of the year, which is almost double the volume removed in the corresponding period last year.
Market Outlook – Freight Futures
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Whilst care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. SSY Consultancy & Research Ltd can accept no responsibility for any errors or omissions or any consequences arising therefrom. The views expressed are those of SSY Consultancy & Research Ltd and do not necessarily reflect the views of any other associated company.
