Mid-May freight rate analysis

Mid-May freight rate analysis

As usual, China dominates the headlines, producing nearly 30 million tons of crude steel or about 30% of the world’s output in April. That is more than all of Europe and Japan combined. The raw materials sector paints a similarly striking picture with the Chinese pig iron production growth outpacing the rest of the world 24% to 0.6% respectively. Overall, the Baltic Dry Index has declined for nearly 11 straight sessions - 66 points or 1.8% - to its lowest point since July 2004. The index has plummeted almost 45% when it reached a record high of 6208 on December 6. The Chinese influence is so dominant on the freight market right now that Capesize rates have plummeted 33.5% over the past 30 days and 27% in the past two months and they may fall even further by the end of this week. Freight rates for Capesize between Australia and China have reached $12/mt, a decline of $0.46, or 37%. Meanwhile Capesize rates between South Africa and Europe fell $0.78, or 4.8%, to $15.31/mt. Over the past several weeks Panamax rates have seen a gradual downward trend on shipping rates in the Atlantic, occasionally spiking upward. Overall rates during the previous week drifted down heavily with many smaller units accepting bids in the low to mid $30s to go east. The lowest trans-Atlantic figures seen were under $30’000. In the Pacific, available tonnage exceeds demand by a large margin. There is currently a glut of available vessels facing a shortage of business. Current rates for LME trips back to the Atlantic have dropped to $18’000 daily with few owners seeing more than $20’000. The past week’s Handymax Baltic Index Figures started out strong but then dropped nearly 150 points. In the Atlantic, business has remained steady while in the Pacific there is clearly an excess of Handymax types seeking business. Handysize figures in the meantime are doing quite well with strong demand. On average, daily rates of over $20’000 are being paid to a 29’000 dwt vessel for a straight round voyage via New Zealand while a larger vessel commanded just over $20’000 for a longer journey. The Black Sea region appears to be the overall bright spot with 50’000 dwt vessels receiving $40’000 daily for trips to the East. Indian Ocean iron ore runs to China are considerably softer the high point being $33’000 daily for a 47’000 dwt vessel. Earlier in the week, vessels were seeing figures in the upper $20s to lower $30s. In the Atlantic both size types have improved, though with the coming European holidays, trading will undoubtedly soften somewhat, however, it is widely expected its previous momentum will keep it strong enough to not warrant too much worry.