The Dry Bulk Weekly Review in Shipfix Data
During the final week of September, the forward-looking Shipfix data set has seen an acceleration in the Chinese demand for copper, which could signal increasing manufacturing activities in the fourth quarter. Additionally, an increasing Chinese appetite for Australian coal is fueling higher demand for Capesizes. At the same time, a downward trend for order volumes for Russian agricultural exports weighs on freight rates in the smallest segment.
Robust Chinese Demand for Seaborne Transportation of Copper Suggests Stronger Growth in Q4.
The weekend’s mildly positive Chinese PMI data point towards continued challenging conditions for the world’s second-largest economy. While the official gauge for the manufacturing sector escaped the contraction territory, a reading of 50.2 suggests that growth is unlikely to be spectacular in the near term.
Still, Chinese demand for copper remains robust. Given the red metal’s importance to modern manufacturing, increasing demand is often seen as a bellwether for economic growth. Aggregate order volumes for copper bound for China for the past two months have seen a pick-up, with August broadly in line with the same month a year ago and September outperforming compared to 2022.
Chinese demand for seaborne transportation of copper has accelerated throughout the past month, suggesting that manufacturing activities in the world’s second-largest economy may gather pace in the coming months. Last week, total volumes for discharge in China exceeded 275,000 tonnes and reached the highest level in nearly two months. Hence, the subdued PMI data may need to be taken with a pinch of salt.
In contrast to the strong order volumes for shipments to China, the demand for copper in the rest of the world has faced headwinds in the past month. The decline has been broad-based, with many countries, e.g. India and Japan, behind the slowdown.
The typical cargo sizes have recovered somewhat in the past few weeks after some volatility. Still, the weekly average rarely deviates too far from 15,000 tonnes.
Rising Demand for Australian Coal in China Provides Support for Capesize Freight Rates
The Chinese unofficial ban on imports of Australian coal is becoming an increasingly distant memory. The introduction of the measure followed a period of increasingly tense relations between Beijing and Canberra and caused a disruption of traditional trade flows for the dirtiest of fossil fuels. Also, vessels laden with Australian coal were caught in limbo off the Chinese coast for months, contributing to a lower tonnage supply. However, a change of government in Australia and a raving Chinese appetite for coal contributed to the restrictions being removed early in the year.
Weekly cargo order volumes for Australian coal bound for Chinese ports have been trending higher since early January. While the trajectory higher has been far from smooth, with substantial week-on-week drops at times, the demand in the spot market reached a new high for the year in the past week. Aggregate weekly orders topped 1.9 million tonnes during the seven-day period, beating the previous weekly peak by nearly seventeen per cent.
The recent increase in Chinese demand for seaborne transportation of Australian coal comes at the same time as total cargo volumes for coal discharging in China are trending lower following a peak in July. The pressure on volumes has primarily affected exports from Indonesia onboard Panamaxes. However, the demand for Panamaxes and the longer distances involved in the Australian coal trade have offset some of the adverse effects for the mid-sized vessels. Nevertheless, the Capesizes have been the preferred choice for the trade in the past few weeks, contributing to the recent strong performance for the largest segment.
Downward Trend for Order Volumes for Russian Agricultural Exports Weigh on the Demand for Handysizes
The December wheat futures listed on the CBOT shed nearly twenty per cent during the third quarter. The decline extends on the losses in the previous three quarters, bringing the losing streak to the longest in fourteen years. A bumper crop in the Northern Hemisphere has offset much of the adverse effects arising from the disruptions to the seaborne exports of Ukrainian grains. Still, a question mark over Russian agricultural exports developed last week, as the country imposed export restrictions on diesel and gasoline in order to safeguard domestic supplies. The news briefly raised concerns that a lack of fuels could affect the Russian harvest and weigh on export volumes.
A sizeable wheat harvest has contributed to higher demand for seaborne transportation of Russian agricultural commodities. However, after an early seasonal peak at the beginning of August, weekly cargo order volumes have been trending lower. The past week saw aggregate volumes dropping below two million tonnes. As a result, the total volume for September was twenty per cent lower than the reading for August. However, if the pattern of recent years repeats itself, demand may see an upswing in October.
The weaker demand for future seaborne transportation of Russian agricultural commodities has mainly affected order volumes for the smaller vessel segments. The aggregate for the Handysizes has, in the past few weeks, been around 50 per cent of the volumes observed two months ago. However, ordering activities for the Supramaxes have been more robust, with the segment increasing its share of the trade in the past few weeks. The development contributed to Supramaxes outperforming the Handysizes in the past month.
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