April 2004 freight market report ..US Chartering Company
Following the month-over-month uprise in
freight rates that lasted quite a while, the month of April was a scene for a downward movement in the
freight market, observed particularly towards the end of the month. The drop in Baltic Index was recorded as 17%, while Capsize index fell 13% during the whole month. As a result of the sharp drop of the Panamax index only within the last week of April, same has resulted in an overall fall of 25%. Handymax index in the same period was down by 15%.
The Easter holidays caused a softening in the Capesize market, however following more cargoes emerges in both basins this market started to pick up again from mid-April. Daily rate for a round voyage in Pacific was round about $65'000/day for a modern 172'000 tonner vessel. With similar vessels rates for Atlantic round voyages were in the high $60'000's. Again daily rates were quoted at low $80'000/day for voyages from the Atlantic to the
Far East.
Approaching holidays in Asia for the first week of May caused a downturn of the market during the last week of April and the Baltic index fell sharply. On top of that the congestion at ports loading
iron ore and coal, the measures taken by the Chinese government to cool down the overheated economy and the force majeure situations also contribute to this downward trend. The daily rate for a Baltic Capesize time charter route fell from $65'000 to $59'000 average
freight.
As a period activity, a 170'000 tonner vessel built 99 was reported fixed at $65'000/day for one year and a 151'000 tonner vessel built 95 was fixed at $39'000/day for 3 years basis delivery for May in the Atlantic.
The Panamax market was also rather slow compared to the bullish trend up to the middle of March. Expectations for an upturn during the second half of April did not materialize. Instead, all area rates were remarkably down during the last week of April.
Far East and Atlantic round voyages were concluded at below $30'000/day. Trips from the Continent to
Far East at the same time were fixed at just below $40'000/day. Still, looking at the reduced congestion in South American and Australian ports easing the tight tonnage balance and the steel demand still remaining strong, the activity is expected to continue. Such expectation can be interpreted as a possibility that existing levels can see some improvement.
Reported period time charters were $39'000/day for a modern 73'000 tonner for delivery
Far East in May. However with this rate presently well above the spot market rate, and with the paper market still much lower than the physical market, there are hardly any 12 months, or longer, timecharter fixtures reported. On the contrary owners/operators would like to fix their own tonnage out for period. As a result, there are owners willing to reduce their hire ideas against period charters to first class charterers. However the rate levels must still be considered substantial compared to a year ago. Nevertheless, many market players still expect a strong market for forward positions.
For Handysize market, the Easter holidays, slow grain movements out of
Argentina and
Brazil together with predictions of lower crops there, the long awaited Golden week, and last, but not the least, the Chinese factor (new regulations on USD reserves, L/C issues, squeeze on commodity prices) brought about a dramatic change of mood in the shipping market. All handy routes lost on average $3'000-3'500 per day over the last 30 days. The Pacific - Continent and Continent – USG rates declined by a small fraction compared to other index routes. There is no longer the previous eagerness to take vessels for period employment. Now the owners are looking at contract possibilities with the option to hedge the same on the paper. Unfortunately the recent developments with the index plummeting caused a change of attitude among the cargo holders as well. If they can, they would postpone contract negotiations on the expectation of lower rates in the near future. Owners believe that once the Golden week is over, and Chinese banks build required USD reserves, the market will be boosted and the golden era will be back. But the same was expected to happen after Easter holidays as well. On the other hand, one should keep in mind that Panamax rates have been dropping even faster which can induce the charterers to change Handymax stems into Panamax shipments.