The Dry Bulk Weekly Review in Shipfix Data
The supramaxes have faced an extended period of weak demand and soft freight rates, with global order volumes currently significantly lower than a year ago. The forward-looking qualities of the Shipfix data sets signal more weakness ahead for the segment. In addition to an unfavourable demand and supply situation, a recent rebound in market lead times adds to the sombre outlook.
Low Cargo Order Volumes for the Supramaxes Indicate Continued Pressure on Freight Rates
While the headline Baltic Dry Index recorded gains for a second consecutive week, the gauge for the supramaxes lost further ground over the past five sessions. As of Friday, the midsized segment’s freight indicator had not recorded a positive day in over five weeks. While daily losses have been relatively limited, the extended slide has led to the gauge losing twenty per cent of its value since the first half of October. Compared to a year ago, the indicator is nearly eleven per cent lower, well behind the capesizes and handysizes but ahead of the panamaxes.
The past two weeks have seen demand for supramaxes picking up marginally across the major basins, but volumes were still significantly lower than a year ago. Continued weakness in the Atlantic saw cargo order volumes 55 per cent lower than during the same period in 2023. In the Pacific, demand was 43 per cent lower, while the Indian Ocean saw a 54 per cent drop.
The weak demand for the supramaxes has, in recent weeks, seen some offset from pressure on vessel supply in the Pacific and the Atlantic, with the number of vessels available in the two basins being lower than the long-term average. On the other hand, the Indian Ocean saw tonnage supply mostly exceeding the average. However, last week saw supply leaving the below-average territory in both the Atlantic and the Pacific.
With the recent weak demand situation and lack of indications that cargo order volumes are picking up materially, there is little to suggest that the supramaxes will see a revival in the short term. While the past weeks’ tonnage supply situation provided some limited offset, recent days’ pick up in available vessels added to an increasingly sombre outlook.
Lower Chinese Demand for Supramaxes Contribute to the Headwinds
As highlighted above, the headwinds for the supramax gauge have been fuelled by soft demand for cargoes loading across the major basins. While cargo order volumes have suffered from a decline in demand from importers across the globe, a drop in appetite from Chinese buyers has taken a significant toll on the worldwide aggregate.
Last week, cargo order volumes for supramaxes discharging in China were around 80 per cent lower than a year ago, with the coal trade contributing to a significant part of the weakness. Likewise, a decline in demand for supramaxes for Indian seaborne imports of coal has contributed to cargo order volumes for discharge in the country being 33 per cent lower than a year ago.
Beyond China and India, aggregate demand is around a third lower than during the same period last year. However, in the rest of the world, the decline in demand is more widespread across the different cargo types, with agricultural commodities standing out somewhat.
While demand for supramaxes for Indian imports improved somewhat last week, global cargo order volumes remained depressed. Hence, the short-term outlook for freight rates in the supramax segment is not promising. At this stage, any recovery appears dependent on a coal trade rebound.
A Recent Rebound in Market Lead TImes Add to the Supramaxes’ Woes
The current demand and supply situation could look better for the supramaxes. A decline in demand for seaborne transportation of coal to China and India has contributed to significantly lower cargo order volumes for the supramaxes. At the same time, tonnage supply has been trending higher in recent weeks.
In recent weeks, market lead times for the supramaxes have fallen below their long-term averages across the major basins. Usually, this would be a bullish signal for freight rates. However, as aggregate global cargo order volumes were around 50 per cent lower than a year ago during the past week, the development has merely acted as a minor offset.
In recent days, the average time between the first circulation date and the first loading date has been rising. While the market lead times in the Indian Ocean and the Atlantic ended last week below their long-term averages, in the Pacific, the measure moved in line with its average. Should market lead times continue to increase in the coming weeks, it would add to the current downward pressure on supramax freight rates.
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