The Dry Bulk Weekly Review in Shipfix Data
Average market lead times for dry bulk shipping in the Atlantic have seen a volatile start to the year. For the capesizes, the Shipfix indicator points towards some volatility ahead for freight rates in the basin. On the other hand, for the mid-sized vessel segments, a recent decline in lead times indicates that a seasonal rebound is underway.
Market Lead Times for the Capesizes in the Atlantic Indicate Moderate Volatility for Freight Rates
Despite some gains over the past few sessions, the Baltic Exchange’s capesize index remains around 35 per cent below the high for the year, recorded during the first week of January. While the reading is sobering, the gauge is currently approximately 40 per cent above the low for the year set in mid-January. Much of the freight rate volatility for the largest vessels has been driven by variable conditions in the Atlantic basin, with shifting vessel supply providing much of the fuel for the volatility.
Beyond a volatile vessel supply, activities in the Atlantic have seen significant variability in market lead times since the final weeks of last year. A dip in lead times during the second half of December signalled an increased demand for tonnage for near-term delivery, which fuelled the segment’s good fortunes at the beginning of the year. However, the first half of January saw lead times increasing, weighing on demand and freight rates.
The first half of February saw a significant increase in the average time between the first date of circulation of orders and the first loading date. This development suggested that the capesizes would face some headwinds during the second half of the month. However, given the decline during the past week, which has brought the numbers broadly in line with the average for the past year, the pressure on freight rates should be modest. Also, should the lead time continue to decline during the coming week, any weakness could be shortlived, providing some volatility.
A Decline in Lead Times on the ECSA Ags Trade for the Panamaxes Indicate Higher Demand
The past two weeks have seen some tentative signs of a rebound in demand for panamaxes loading agricultural commodities on the east coast of South America. The week before last saw aggregate cargo order volumes of around 2.1 million tonnes. However, the past week saw the aggregate retreat to just above 1.5 million tonnes. Most of the volumes have been for shipments to the Far East and Southeast Asia, contributing to a healthy boost in tonne-mile demand for the segment and an improving outlook for freight rates.
In addition to improving cargo order volumes, a recent drop in the trade’s market lead times should provide additional support for freight rates. After a period of extended lead times, the past week has seen a significant drop, highlighting an increasing appetite for more rapid delivery. The average time between the first date of circulation of orders and the first loading date has also dropped below the average for the past year, suggesting that the trade will provide support for panamax freight rates in the near term.
Demand for Supramaxes Loading ECSA Looks Set for a Seasonal Rebound
The Baltic Exchange’s freight indicator for the supramaxes has marginally outperformed the headline Baltic Dry Index year-to-date. Still, the gauge has declined by 22 per cent since last year’s final reading, as weekly cargo order volumes have trended lower since early January. All of the major basins have seen lower demand. Last week, aggregate global demand had declined by more than 40 per cent compared to the second week of January. The extended period between Christmas and the Chinese Lunar New Year is likely to have contributed to the weak demand. Hence, the coming weeks should see a seasonal rebound.
While soft demand and relatively robust tonnage supply have weighed on freight rates, average market lead times have recently signalled that fortunes may shift in the near term. Globally, the supramaxes have seen a decreasing average time between the first date of circulation of orders and the first loading date. The development has been particularly strong for agricultural commodities loading on South America’s East Coast. Over the past two weeks, the average market lead time has dropped sharply and is currently well below the average for the past year. However, the robust tonnage supply situation has acted as an offset on the improving demand outlook.
The recent developments highlight an increasing demand for vessels for delivery in the very near future, suggesting that a seasonal rebound is about to begin. Higher cargo order volumes would also Hence, the grains and oilseeds trade could provide support for higher supramax freight rates in the coming weeks.
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