The Dry Bulk Weekly Review in Shipfix Data
The Shipfix data set has, in the past week, signalled a recovery in global demand for Supramaxes, supporting higher freight rates in the segment. Similarly, the forward-looking data set suggested that the stars are aligning for a rebound for the Panamax freight rates. Additionally, a sharp drop in demand for seaborne transportation of rice could indicate that global supplies will become tighter, ending a period of easing prices.
A Recovery in Order Volumes Support Higher Supramax Freight Rates
In the past month, as the Baltic Exchange’s Capesize index has surged by around 135 per cent, the Supramaxes have enjoyed healthy by far from such spectacular gains. The freight rate gauge for the vessel segment has recorded a gain of around ten per cent for the past month. However, the solid reading hides a tale of two parts. Despite a recovery last week, the freight rate index remained more than six per cent below September’s peak at the end of last week.
During the second half of September, weekly global cargo order volumes for the Supramaxes retreated from a high of 41 million tonnes to 25 million tonnes. However, since then, ordering activities have staged a recovery during the past two weeks. The rebound has been fuelled by increasing demand in the Pacific and Indian Oceans. Still, last week’s order volumes were somewhat below the weekly levels observed during most of the third quarter.
At the same time, as order volumes recovered over the past two weeks, the tonnage supply showed some signs of pressure. While the number of vessels increased in the Indian Ocean and the Atlantic the week before last, the surge proved short-lived, with supply falling back last week. On the other hand, in the Pacific basin, the tonnage supply has been trending lower for some time.
Hence, in light of a recovery in ordering activities and vessel supply showing signs of some pressure, freight rates in the Supramax segment may continue to recover some of the losses from recent weeks.
Panamaxes on Track for a Rebound?
In a development similar to what happened in the Supramax segment, the Baltic Exchange’s freight rate gauge for the Panamaxes has retreated from the peak recorded during the second half of September. However, in contrast to the Suprmaxes, the Panamaxes’ recovery ran out of steam last week, with the freight rate gauge now some nine per cent below the high for September. The recent decline has also contributed to the indicator remaining more than 25 per cent below the level seen a year ago.
The recent weakness of the Panamaxes has been due to a drop in demand, with falling tonnage supply providing some offset to the negative development. Weekly cargo order volumes topped 20 million tonnes by a considerable margin throughout much of September, supporting freight rates. However, the latter parts of September saw global demand dropping to around eighteen million tonnes, with all basins exhibiting weakness.
On the other hand, the past two weeks have seen demand recovering, with the aggregate for the past week edging above 20 million tonnes. The rebound in demand has been particularly notable in the Indian Ocean, but volumes in the Atlantic and the Pacific have shown signs of stabilising. Combined with the downward trend for global tonnage supply, this could herald a recovery for the Panamax freight rates.
Rice Prices Could Recover Recent Losses as Weekly Cargo Order Volumes Drop Sharply
After reaching the highest levels since the middle of February, rice prices have fallen back since the beginning of September. The November futures for rough rice listed on the CBOT are currently trading around five per cent below the levels seen at the beginning of last month amid volatile conditions. Still, despite the recent decline, prices have been on an upward trend for the past five months as global supplies remain tight in the wake of Indian restrictions on exports of the commodity.
An upward trajectory for the demand for seaborne transportation of rice since early August has pointed towards an easing of the tight global supply situation and contributed to prices declining over the past six weeks. Given the forward-looking nature of the cargo order data, the continued recovery in cargo order volumes for rice loading globally suggests that prices may continue to face some headwinds in the near term. However, while last week’s drop may be a temporary development, should the weakness be more long-lasting, rice prices will likely move higher in the coming months.
The average cargo size for the global rice trade has remained relatively stable over the year to date. While recent weeks have seen the typical cargo somewhat above the average of 22,000 tonnes for the year so far, there is little to suggest that the trade will see any significant change.
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