The Dry Bulk Weekly Review in Shipfix Data
The capesizes have been enjoying an unusually robust start to the year amid a favourable demand and supply situation. Shipfix’s unique forward-looking data sets suggest the largest vessels will continue to benefit from good markets. The picture is more mixed for the mid and small-sized segments, with the panamaxes likely to outperform their smaller siblings.
Capesize Freight Rates Supported by Supply Situation and Geopolitical Disruptions
Over the past month, the capesize market has been extensively described using various superlatives, as it has been performing far better than standard seasonal patterns for the time of year would suggest. Despite a few days in the red last week, the Baltic Exchange’s capesize index remained nearly twice as high as a month ago. However, a year-on-year comparison is even more impressive, with the gauge around 170 per cent above the reading twelve months ago.
Higher cargo order volumes during January and February provide some explanation for the exceptional markets. Last month, demand rose by around five per cent compared to the same month the previous year. Still, this paled compared to developments during January, when global demand surged by a third year-on-year. While the market evolution may seem counter-intuitive on the basis of weaker aggregate demand in February, global market lead times for the capesizes trended upwards during the first three weeks of the year. This trend indicated that demand was geared towards later delivery. However, since then, the nature of the market has shifted towards more imminent requirements. As a result, freight rates have continued to gain ground.
After a surge in cargo order volumes the week before last amid solid demand in the Atlantic, demand during the past week faced some headwinds. However, a recovery for the vessel supply in the aforementioned basin came to an end last week, offsetting the negative impact of weaker demand.
Beyond order volumes and vessel supply, disruptions to global supply chains, rising geopolitical tensions, and some shifting trade patterns have supported freight rates. Hence, the capesizes should continue to enjoy good, albeit volatile, markets.
A Surge in Cargo Order Volumes Contributed to Higher Panamax Freight Rates Last Week
While the panamaxes have had a decent run over the past month, the solid performance of their freight index is a far cry from what the capesizes have recorded. The Baltic Exchange’s panamax index has gained around 31 per cent since a dip in early February. The gauge is also more than fifteen per cent above the levels seen a year ago. However, despite its recent strength, it remains around a quarter below the readings recorded in early December.
Weekly cargo order volumes for the panamaxes have been trending lower since the second half of November. Much of the downward pressure on demand has originated in the Pacific and Indian Oceans. In the Atlantic basin, ordering activities have not seen the same downward trend over the past three months but have faced considerable volatility.
A rebound in cargo order volumes in the Atlantic since the beginning of February has contributed to the recent positive developments for the Baltic Exchange’s panamax index. The higher demand has also seen an increase in the competition for available vessels as tonnage supply in the basin has fallen compared to the early stages of the year.
Over the past seven days, the highest aggregate cargo order volumes were recorded since early January, with demand on the rise across all of the main basins. Hence, the recent downward pressure on tonnage supply should provide further support for the panamax freight rates.
Rising Headwinds for Supramaxes Amid Depressed Demand and Rising Tonnage Supply
The supramaxes have been the laggards among the dry bulk vessels over the past month. Still, the mid-sized segment has been performing better than a year ago. The Baltic Exchange’s index for the segment ended last week nearly fourteen per cent above the level recorded a year ago.
After a solid start to the year, cargo order volumes for the supramaxes have been trending lower. The weaker demand has been affecting all of the major basins, but the Indian Ocean has seen the most significant drop since the early parts of the year. Aggregate global volumes retreated towards 40 million tonnes last week, the lowest reading since the end of last year. Compared to a year ago, global cargo order volumes were around seven per cent lower last week amid lower demand in the Indian and Pacific Oceans. However, ordering activities in the Atlantic were around 30 per cent higher.
While tonnage supply declined somewhat in the Indian Ocean last week, the general trend for the supramaxes over the past month has been towards an increasing number of vessels becoming available. This development, combined with depressed cargo order volumes, should provide some headwinds for the freight rates in the supramax segment. However, continued disruptions to the global trade flows, notably the problems associated with the Panama and Suez Canals, should boost tonne-mile demand and provide an offset.
Lower Demand may Herald Softer Markets for the Handysizes
Despite being at levels well below the dizzy heights of the capesizes, the handysizes have been the best of the rest for the past month. The gauge for the smallest dry bulk segment has advanced by around a third over the past month. In addition, it is around 25 per cent higher than at the same time last year.
Demand for the handysizes has had a robust start to the year, with the average weekly volumes for the first two months at around 34 million tonnes, nearly a quarter higher than a year ago. At the same time, tonnage supply remained broadly in line with the levels seen a year ago, providing further support for elevated freight rates.
After two weeks of solid cargo order volumes, demand fell last week as activities in the Pacific came under pressure. However, continued robust demand in the Atlantic and weaker tonnage supply supported the performance of the segment’s Baltic index. While the past week’s drop in demand may prove short-lived, it could also be the beginning of a period of relative weakness should last year’s pattern repeat itself. As a result, handysize freight rates may face some headwinds going forward.
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