The Dry Bulk Weekly Review in Shipfix Data
The panamaxes have been the better-performing dry bulk vessel segment in recent weeks, with a recovery for cargo order volumes in the Atlantic during the latter parts of September a contributing factor. Still, the current global demand and supply situation suggests that the short-term outlook for the segment is less than promising. On the other hand, factors such as market lead times could offer an offset for challenging market conditions.
The Panamax Demand and Supply Situation Indicates Headwinds
The panamaxes were last week’s best-performing segment, with their freight index advancing by more than three per cent. The positive performance contributed to the panamaxes outperforming the other segments over the past month as well. Despite a week of losses at the end of September, the index was more than eleven per cent higher than a month ago at the end of yesterday’s session. Still, compared to a year ago, the gauge for the panamaxes is around eleven per cent lower.
Global cargo order volumes for the panamaxes faced pressure last week and were nearly fifteen per cent lower than during the preceding seven days. The decline was, to a great extent, the result of weaker demand in the Atlantic. Cargo ordering activities in the Atlantic basin had been recovering in recent weeks, but last week brought an end to that, possibly as a result of Hurricane Milton. On the other hand, demand bounced back in the Pacific as the Chinese Golden Week came to an end, but it was not enough to offset the negative development in the Atlantic.
The tonnage supply situations in the major basins have been volatile recently. The number of available vessels in the Atlantic and the Indian Ocean fell below the weekly average for the past 21 months during the latter stages of September and early October. However, the markets saw a significant supply increase last week, sending the weekly numbers to levels above the long-term average. On the other hand, the Pacific continued to be well supplied, with the number of vessels available in the basin well above average for a third consecutive week.
From a demand and supply perspective, the short-term outlook for the panamaxes does not look promising. Recent depressed demand and rising tonnage supply could weigh on freight rates in the near future. Still, a rebound in cargo ordering activities following the Golden Week and recovery in the Atlantic would offset such a development.
Shorter Market Lead Times Could Offset Challenging Demand and Supply Situation
While the supply and demand situation for the panamaxes looks challenging, other factors, such as market lead times, will also contribute to the evolution of panamax freight rates in the coming weeks.
Market lead times, or the average times between the first circulation date of cargo orders and the first loading date, have recently declined significantly in the Indian Ocean and the Pacific. At the same time, the measure has remained relatively stable at low levels in the Atlantic basin.
In the Atlantic, the average market lead time fell below the long-term average during the latter parts of September. The development contributed to higher freight rates during previous weeks and provided an offsetting effect last week amid weak cargo ordering activities. In the Indian Ocean and the Pacific, market lead times are also currently below the long-term average, but the developments are more recent.
The indicator for demand timing is often volatile and can highlight transient developments in the market. Still, the shift in demand towards more immediate tonnage deliveries, with all major basins well below average, should provide some short-term support for panamax freight rates.
A Seasonal Rebound Is Underway in the US Gulf
In addition to market lead times, developments in individual loading areas could also contribute to how panamax freight rates will develop in the coming weeks. The seaborne trade in US grains and oilseeds is one example of where local supply and demand dynamics can affect freight rates.
Demand for spot seaborne transportation of agricultural commodities onboard panamaxes from terminals in the US Gulf is currently experiencing a seasonal rebound. Weekly cargo order volumes have been trending higher from low levels in July. The development will provide additional support for freight rates in the Atlantic basin, should it continue. Compared to a year ago, cargo order volumes have shown a higher degree of consistency. As a result, the total for September was more than twice as high as during the same period last year.
Regarding tonne-mile demand in the trade, recent developments in the grains and oilseed trade from the US Gulf also look promising, as a large portion of cargo order volumes is for the distant shores in the Far East and Southeast Asia. Hence, the freight gauge for the panamaxes has some potential for remaining one of the better performers, especially as market lead times remain below average.
For more information on Shipfix and on how to leverage our data for decision-making and market analysis, please drop an email to enquiries@shipfix.com
