The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking data sets suggest that freight rates in the mid and small-sized dry bulk vessel segments may face diverging fortunes in the coming weeks. Amid continued headwinds for global demand, tonnage availability across the different segments is becoming critical to any near-term developments.
Lower Tonnage Supply Could Drive a Recovery for Freight Rates in the Panamax Segment
The past few sessions have seen the Baltic Exchange’s Panamax freight index recovering somewhat. Still, the gauge remains around seven per cent below the levels seen towards the end of October. It is also nearly six per cent lower than at the same time last year. While the segment’s year-on-year performance pales compared to the Capesizes, it is marginally stronger than the development for the Supramaxes and well above the losses experienced by the Handysizes.
A global decline in ordering activities has driven the recent weakness of the Panamax spot freight rates. Since the middle of October, weekly aggregate cargo order volumes have dropped below 20 million tonnes. The recent decline represents a fall in global order volumes of around 25 per cent compared to the first half of September.
The weaker order volumes have, to a great extent, been the result of lower demand in the Indian Ocean, where weekly volumes have retreated towards five million tonnes. Initially, the Atlantic has also contributed to the lower demand, but a recovery has been underway in the past two weeks. While demand in the Pacific remained relatively stable over the past few months, some weakness was evident over the past week.
In the week before last, Shipfix recorded a limited pickup in aggregate global cargo order volumes, which was primarily the result of higher demand in the Atlantic. Despite a relatively strong start to the past week, aggregate demand failed to maintain the positive momentum, and volumes declined yet again. At the same time, tonnage supply has seen downward pressure in the past weeks, with the development accelerating over the past seven days. As a result, the outlook for freight rates in the Panamax segment is improving.
Supramaxes Are Lacking the Momentum for a Substantial Recovery
Following last week’s gains for the Supramaxes, the Baltic Exchange’s index for the segment has nearly returned to the levels seen at the end of October. Still, the gauge remains around seventeen per cent below the highs seen during the second half of September. Also, in line with the developments for their larger siblings, the Panamaxes, the spot freight rates are currently around eight per cent below the levels seen a year ago.
After a brief recovery in early October, aggregate global weekly cargo order volumes for the Supramaxes have remained subdued over the past few weeks. Compared to the highs during September, ordering activities have fallen by nearly a fifth. The last four weeks have seen global order volumes of around 37 million tonnes. The decline in demand for seaborne transportation onboard Supramaxes has been driven by significantly lower volumes in the Indian Ocean and the Pacific. At the same time, activities in the Atlantic have remained relatively stable.
However, the recent improvement in the segment’s freight rates results from falling vessel supply, offsetting some of the adverse effects stemming from continued subdued ordering volumes. In particular, the Pacific basin saw a substantial drop in available vessels during the week before last. However, the development proved shortlived, with supply rising last week. For the other two basins, supply has remained volatile over the past few weeks but at levels below what was observed at the beginning of October.
The continued pressure on cargo order volumes, especially in the Indian Ocean, combined with only limited downward pressure on vessel supply, indicates that the probability of the Supramaxes staging a substantial recovery remains low. Hence, the segment is likely to continue to underperform its larger siblings.
Freight Rates for Handysizes Could See a Limited Recovery Amid Weaker Supply
In recent weeks, the Baltic Exchange’s freight index for the Handysizes has been trailing the ones for larger segments by a considerable margin. Last week, the gauge dropped by 6.3 per cent, while the sub-indices for the larger segments were all in the black to a greater or lesser extent. The spot freight rates for the segment also remain around 25 per cent below the levels observed at the same time last year.
Over the past few weeks, global demand for seaborne transportation onboard Handysizes has faced significant pressure. After a brief recovery in early October, weekly cargo order volumes have retreated to around 27 million tonnes over the past month. While there are signs of weakness across all basins, the Atlantic has provided much of the decline, with volumes in recent weeks representing a 20 per cent drop since September. Still, in the Pacific and the Indian Ocean, demand has fallen by around ten per cent.
Freight rates in the Handysize segment have also suffered amid high tonnage supply across the three basins. However, the past week saw a decline in available vessels, which could support a rebound for freight rates should the development extend into the coming weeks. Still, at this stage, any such recovery is likely to be limited as the reduction in vessel supply is generally in the form of a mean reversion.
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
