The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s tonnage supply and cargo order data point towards mixed fortunes ahead for the different dry bulk segments. The capesizes could outperform their smaller siblings in the near term, as the demand and supply situation for the largest vessels is supportive of higher freight rates. In contrast, the smaller bulkers will likely face continued headwinds amid depressed demand and rising supply
Market Conditions for the Capesizes Point Towards Rising Freight Rates
The strong start to the year for the capesizes has been fading over the past few weeks. Since peaking during the first half of March, the Baltic Exchange’s index for the largest dry bulk vessels has nearly lost half of its value. Still, despite the substantial drop in recent weeks, the gauge remains around sixteen per cent above the levels seen a year ago.
Global weekly cargo order volumes have shown some volatility over the past month. While the weekly swings are not necessarily out of the ordinary, they have still contributed to softer market conditions. Demand in the Indian Ocean has shown some strength, but cargo ordering activities in the Atlantic basin have faced significant headwinds.
The demand and supply situation in the Atlantic basin contributed to much of the unseasonal strength for the capesizes during the early parts of the year. Pressure on tonnage supply and robust demand delivered favourable conditions for the largest vessels. However, an upward trend for vessel availability in the Atlantic over the past month has led to a change in fortunes.
Additionally, market lead times for orders in the Atlantic basin were on an upward trajectory for much of the past month after reaching a low for the year in the middle of March. While easing somewhat over the past few days, the substantially longer lead times suggested that demand for capesizes in the Atlantic shifted into the future. In the other major basins, the measure remained reasonably stable.
The past week enjoyed robust daily cargo ordering in the capesize segment, but Easter is likely to have provided some disruptions of normal patterns. At the same time, vessel supply came under pressure after increasing in the run-up to Easter. Together with indications that market lead times in the Atlantic are facing downward pressure, the current demand and supply situation for the capesizes may offer some respite from recent declines.
Depressed Cargo Order Volumes to Continue to Weigh on Panamax Freight Rates
After peaking in the middle of March, the Baltic Exchange’s panamax index has declined by around 26 per cent. Still, despite the sizeable retreat, the freight rate indicator remains only seven per cent below the reading seen a year ago. Also, compared to the capesizes and the broader Baltic Dry Index, the panamaxes have fared relatively well over the past month.
The panamaxes enjoyed robust performance during February and the first half of March, with a gain of more than 60 per cent for the segment’s index during this period. The positive performance was, to some extent, fuelled by a recovery in demand in the Atlantic basin. At the same time, downward pressure on tonnage supply in the Indian Ocean and the Atlantic provided another positive development for freight rates. However, there has been a significant downward pressure on aggregate weekly cargo order volumes since the middle of last month. While tonnage supply also has seen a decline over the past few weeks, it has not been sufficient to offset falling cargo order volumes.
The past week saw a recovery in cargo ordering activities, with the aggregate volume topping eighteen million tonnes. However, the strong rebound was not universal, with demand in the Pacific basin chiefly responsible for the improving data. While the development for the demand is mildly positive, tonnage supply also increased after dipping around Easter. Hence, freight rates in the panamax segment look set for more headwinds.
Falling Tonnage Supply Insufficient to Support Supramax Freight Rates
Like the other dry bulk segments, the supramaxes enjoyed a solid start to the year. However, in line with the developments in the different segments, the robust markets came to an end during the second half of March. Since the peak two weeks ago, the Baltic Exchange’s freight index for the supramaxes has declined by around nine per cent. Still, the gauge remains around eight per cent higher compared to a year ago.
With a few exceptions, weekly demand in the supramax segment has been trending lower since the beginning of the year. All of the leading basins have contributed to the global decline, but the drop in the Pacific has been less severe than in the Indian Ocean and the Atlantic. The Easter holidays disrupted activities during the past two weeks, with global cargo order volumes retreating towards 30 million tonnes. Still, last week recorded a minor recovery in cargo ordering activities despite continued headwinds in the Atlantic.
The low cargo order volumes have been partially offset by falling vessel supply in the Pacific. However, the number of available vessels rose somewhat in the Indian Ocean and the Atlantic during the past week. While the current demand and supply situation looks unfavourable for the supramaxes, a fall in market lead times suggests that demand is shifting towards more imminent deliveries. The development could signal that freight rates in the supramax segment will stabilise.
Handysizes to Face Further Headwinds Amid Depressed Demand
Like their larger siblings, the smallest dry bulk vessels have struggled over the past few weeks. While lagging the other segments during the initial stages of the year, the handysize sub-index gained 40 per cent between early February and late March. However, since the final stages of the past month, the gauge has retreated by around eight per cent. Still, the limited headwinds during the past few weeks have left the index around thirteen per cent higher than a year ago, outperforming the gauges for the larger segments.
For the handysizes, the past few weeks have evolved along a pattern similar to the supramaxes, with lower cargo order volumes in the Indian Ocean and the Atlantic weighing heavily on the global weekly aggregates. However, in contrast to their larger siblings, last week saw a marginal recovery for demand in the Atlantic, which contributed to the weekly aggregate edging higher. Still, at nearly 26 million tonnes, weekly global cargo order volumes remain substantially lower than the levels seen during much of the first quarter. Despite being well below recent readings, cargo order volumes during the past week were marginally higher than during the first week of April last year, with demand in the Atlantic Pacific basins contributing positively to the higher reading.
While vessel supply rose in all of the major basins last week, the development merely brought the readings back in line with the weekly average for the first quarter. However, the levels of tonnage supply across the major basins against a background of depressed order volumes suggest that freight rates for the handysizes will remain on the current downward trend.
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