The Dry Bulk Weekly Review in Shipfix Data
Despite a seasonal rebound for cargo ordering activities across most dry bulk vessel segments, spot freight rates have remained under pressure amid rising tonnage supply. Still, the forward-looking qualities of Shipfix’s data sets suggest that a rebound for the mid and small-sized vessels could be on the cards as the harvest season in the Southern Hemisphere approaches. In contrast, the largest vessels look set for continued volatility, especially with the Chinese New Year only a few weeks away.
The Capesizes Are Facing Gravity After a Strong Start to the Year
Following a solid start to the new year, fortunes shifted for the Capesizes during the past week. The Baltic Exchange’s index for the segment declined by 42.8 per cent over the week’s five sessions, more than offsetting the 11.8 per cent gain recorded during the first week of the year. However, the robust performance for the Capesizes during the first week was in stark contrast to developments in the smaller segments, where freight rates declined sharply.
The rising spot freight rates for the Capesizes during the year’s first week came as cargo order volumes recovered sharply following the lack of activities during the Christmas and New Year celebrations. All basins benefitted from the rebound, but, in absolute numbers, activities in the Atlantic dominated proceedings. However, the past week has seen a sharp reversal in global demand, with the Atlantic weighing heavily on total volumes. Overall volumes fell by around twelve per cent week-on-week, but the drop was sharper at 25 per cent in the Atlantic as volumes retreated to 3.2 million tonnes.
In addition to weak demand, increasing tonnage supply has contributed to the weaker spot freight rates. The number of available vessels started to increase at the beginning of the year, and have remained elevated in the Atlantic and Pacific basins. The rising number of available Capesizes and subdued demand suggest that the spot rates will continue to face headwinds in the short term.
Rising Tonnage Supply Weigh on Panamax Freight Rates Despite Demand in Recovery Mode
The spot freight rates for the Panamaxes have been on a downward trajectory since early December, with the daily declines accelerating during the early part of the new year. The Baltic Exchange’s freight rate indicator for the segment has declined by around 42 per cent since the first week of December. As the seasonal weakness has gathered momentum, the gauge has dropped by more than 25 per cent since the beginning of the year.
Since peaking in the middle of November, global weekly cargo order volumes have been trending sharply lower as activities were curtailed by the approaching end-of-year holidays. Still, a generally weaker tonnage supply during parts of the period offset some of the adverse developments on the demand side.
While all of the major basins have experienced falling demand, compared to the weekly averages for November, the Pacific and Indian Oceans have seen the most significant drops. The average weekly cargo order volumes in the two basins have decreased by more than half. However, the fall has been less extreme in the Atlantic at around 35 per cent. Still, developments during the past week suggest that the rout in demand may be coming to an end.
While a downward trend for available vessels padded the spot rates to some extent during the past year’s final weeks, the new year has seen a reversal of the tonnage supply situation. An increasing number of Panamaxes available in the spot market has contributed to the recent significant drops in freight rates in the segment. However, the past week saw the supply increase slow down in the Atlantic and the Pacific, while availability stabilised in the Indian Ocean.
A recovery in demand indicates that spot freight rates for the Panamaxes could start to recover in the coming weeks. While aggregate cargo order volumes remain well below the levels seen during October and November last year, early ordering activities for agricultural commodities loading in the Southern Hemisphere should support volumes in the coming weeks. However, before any meaningful rebound can occur, the market must absorb much of the current tonnage supply.
A Recovery in the Atlantic Could Provide Support for the Supramaxes
The Baltic Exchange’s spot freight rate indicator for the Supramaxes declined by just over ten per cent last week. The index declined by 1.8 per cent on Friday, which extended its losses into a 22nd consecutive session. As the decline has accelerated during the early parts of the new year, the index has fallen by more than 30 per cent since early December.
After trending sharply lower during last year’s final six weeks, global aggregate cargo order volumes for the Supramaxes have staged a rebound during the past fortnight. However, last week’s volumes remained broadly in line with the levels seen in the middle of December, nearly a quarter below the average for October and November. Still, the rebound is, at this stage, somewhat more robust than a year ago.
As the harvest in the Southern Hemisphere approaches, the rise in cargo order volumes has been partially fuelled by higher demand for tonnage loading agricultural commodities on South America’s east coast. Last week’s six million tonnes was an increase of 36 per cent compared to a year ago, suggesting that activities are picking up ahead of what is expected to be a sizeable harvest.
While declining cargo order volumes contributed to lower freight rates during last year’s final weeks, increasing tonnage supply has been the main culprit during the past two weeks. A recent rise in available vessels across all basins has weighed heavily on spot freight rates, and, as long as supply remains high, freight rates will be under pressure. However, last week’s downward adjustment in the Atlantic could herald higher freight rates in the basin, especially if ordering activities for agricultural commodities gather further momentum.
A Strong Rebound for the Handysizes Could See Freight Rates Staging a Recovery
Like for the larger vessel segments, the Handysizes have seen their spot freight rates decline sharply during the first two weeks of the year. The Baltic Exchange’s freight index for the segment has dropped by nearly 30 per cent during the initial stages of the year. In contrast to the other segments, the decline for the Handysizes only began during the second half of December. However, a substantial drop during the year’s first week has contributed to the gauge catching up with the Supramaxes at least.
While weekly cargo order volumes fell by nearly 60 per cent between the beginning and the end of December, the Handysizes have seen a strong rebound in demand over the past two weeks. Last week, global aggregate volumes rose above 32 million tonnes, with the Atlantic basin contributing considerably. Compared to a year ago, last week’s reading for the Atlantic was 43 per cent higher. In line with developments for the Supramaxes, rising demand for seaborne transportation of South American agricultural commodities contributed to the robust volumes.
The Handysizes have also seen a rebound in tonnage supply, but the increase has been somewhat less pronounced compared to their larger siblings. In the Atlantic and Indian Ocean basins, the rebound in supply has been chiefly a mean-reversion, while the Pacific has seen a spike in availability.
The robust recovery for order volumes during the first two weeks of the year and the approaching harvest in the Southern Hemisphere, combined with a relatively modest increase in tonnage supply, could see freight rates for the Handysizes recovering in the coming weeks. Developments in the Atlantic are likely to provide much of any upward momentum, at least over the short term.
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