The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking data sets indicate that there could be some upside for dry bulk freight rates in the near term. Still, past seasonal patterns suggest that the positive momentum may prove short-lived in some segments as a patch of soft demand is likely to develop later in the month. As a result, tonnage supply will be decisive for the freight rates.
Shorter Market Lead Times Could Offset Weaker Demand for the Capesizes
Despite last week’s 23 per cent gain, the Baltic Exchange’s capesize index remained nearly 40 per cent below the high for the year recorded in early March. After a robust and unseasonably early start to the year, the good fortunes for the capesizes have faded. Still, before descending into too much doom and gloom, it is important to bear in mind that the freight gauge for the largest segment remains around fifteen per cent higher than a year ago.
There has been considerable downward pressure on global cargo order volumes in recent weeks. While demand in the Atlantic basin has faced the stiffest headwinds, cargo order volumes in the Indian Ocean and the Pacific have also been under some pressure. During the past two weeks, cargo order volumes in the Atlantic have been more than a quarter lower than the average for the first quarter. The decline in the other two major basins has been less severe but still significant. However, compared to the same month last year, aggregate cargo order volumes in April rose by seventeen per cent, with demand increasing, year-on-year, in the Atlantic and Indian Oceans. Still, the past month was a tale of two parts, with the strength originating in the first half.
The week before last showed some promise for a rebound in demand. However, the past week did not maintain the positive momentum, with global cargo order volumes in decline. Weaker demand in the Atlantic and Pacific basins weighed on the global aggregate. However, rising demand in the Indian Ocean and an increasingly tight supply situation in the Indian and Pacific Oceans contributed to the past week’s positive performance.
Over the past few weeks, a downward trend for tonnage supply has provided an offset for weak ordering activities and supported freight rates. Still, the effect may prove shortlived as the number of available vessels in the Atlantic rose last week. However, while the demand and supply situation for the capesizes could look better, a significant drop in market lead times across all major basins suggests that the demand has shifted towards more immediate deliveries. The development could support freight rates in the capesize segment in the near term and provide some offset for subdued ordering activities.
Seasonal Patterns Suggest a Brief Rebound for Panamax Cargo Order Volumes
While a far cry from the dizzy heights of the capesizes, the Baltic Exchange’s panamax index ended the past week in positive territory. A third of a per cent gain for the week was the result of a late recovery for the segment, following some losses on Monday and Tuesday. However, despite falling short compared to their larger siblings during the past week, the panamaxes’ freight index was more than 22 per cent higher than a year ago on Friday.
Last week’s modest gain resulted from declining tonnage supply offsetting weak demand. While demand in the Indian Ocean remained broadly in line with the average weekly volumes year-to-date, cargo ordering activities in the Atlantic and Pacific basins faced considerable headwinds. Compared to the weekly average for the past four months, cargo order volumes fell by more than 30 per cent.
However, in a longer perspective, developments during the past week mirrored those of early May last year. Should last year’s patterns repeat themselves, the coming weeks are likely to see a rebound in cargo order volumes. The past week saw a lower tonnage supply than a year ago, and, as a result, a rebound in ordering activities would support higher freight rates. Still, based on regular seasonal patterns, higher cargo volumes for the panamaxes may prove short-lived, with softer demand likely to develop during the latter parts of the month and into the next.
The Supply Side Has Supported the Supramaxes
Unlike the larger vessel segments, the index for the supramaxes gave up ground throughout the past week. While daily losses were limited, they eventually added up to a weekly decline of 2.5 per cent. Still, despite last week’s loss, the mid-sized segment has been the standout performer over the past month and year. The gauge ended the past week nearly 30 per cent above the level seen a year ago.
Weekly global cargo order volumes for the supramaxes have declined since the middle of March. However, unlike in the larger vessel segments, the tonnage supply has shown some weakness. The development has been beneficial for the segment’s freight rates. While demand was weak last week, it was likely a temporary effect of public holidays. As for the panamaxes, seasonal patterns suggest that the supramaxes will enjoy a brief recovery in demand in the coming week. However, after that, cargo ordering activities will likely cool somewhat until July.
The Handysizes Look Set for Temporary Higher Freight Rates Ahead of Seasonal Weakness
Like the supramaxes, the handysize freight gauge declined over the past five sessions and recorded a weekly decline of 2.9 per cent. However, unlike the indicator for the supramaxes, the index for the smallest vessels has effectively flatlined since the end of February. Strong demand during the second half of February saw the index gain ground. Still, since then, daily moves for the index have been limited amid a relatively balanced demand and supply situation.
Despite a substantial decline in available vessels last week, it was not enough to offset soft demand and led to the handysize freight index retreating after two weeks of limited gains. However, like for the larger segments, last week’s significant drop in cargo order volumes is likely to prove temporary, with a rebound in the coming weeks. Last week’s drop in tonnage supply would support higher freight rates once cargo ordering activities recover, but only for a limited period as the handysizes are likely to face some seasonal headwinds until the end of June.
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