The Dry Bulk Weekly Review in Shipfix Data
The panamaxes were the better-performing vessel segment during the first half of June, with their freight rate index doing considerably better than those of their larger and smaller peers. The second half of the month could prove less satisfactory for the mid-sized vessels, with Shipfix’s cargo order data indicating some seasonal weakness ahead. Still, declining market lead times and positive developments in the Atlantic could provide some offset in the coming weeks.
Global Demand for Panamaxes Under Pressure Despite a Limited Atlantic Rebound
After a few weeks of headwinds, the Baltic Exchange’s panamax index ended last week with a streak of eight consecutive sessions in the black. The gauge declined by more than eight per cent in May but has since gained around fifteen per cent. Still, despite the downward pressure during the previous month, on Friday, the gauge stood nearly 68 per cent above the level recorded a year ago.
After a spike in weekly cargo order volumes in early May, demand trended lower throughout the remainder of the past month. The decline affected all major basins but was more pronounced in the Indian Ocean and the Pacific. In the two latter basins, weekly cargo order volumes declined by nearly 40 per cent over the month. The drop in demand in the Atlantic was less severe at around twenty per cent, with cargo ordering activities seeing a minor rebound at the end of the month.
The past week delivered some positive developments in the Atlantic, with cargo order volumes providing support for freight rates as demand was somewhat higher than a year ago. However, ordering activities in the other basins have remained subdued during the early stages of the month. Global cargo order volumes will likely remain under pressure during the remainder of June as seasonal factors will continue to weigh on demand.
Tonnage supply has been trending higher in the Atlantic and Pacific basins over the past two months. However, last week saw supply in the Atlantic return to its average against a backdrop of rising demand. In the Indian Ocean, vessel availability has been more stable, with numbers broadly in line with the long-term average.
While demand in the Atlantic has provided some good news for the panamaxes over the past week, the segment will likely continue to face headwinds amid seasonal weakness that, under normal circumstances, will last until the end of the month. In addition, the supply situation looks set to contribute to additional weakness.
Declining Market Lead Times Provide an Offset for Low Cargo Order Volumes
As highlighted above, the current demand and supply situation suggests that the panamaxes could face some seasonal weakness in the coming weeks. Cargo order volumes remain depressed, and while demand in the Atlantic shows tentative signs of a pick-up, activities in the Pacific and Indian Oceans stay on the weak side.
On the other hand, beyond seasonally depressed ordering activities, demand has recently shifted towards more immediate deliveries. Market lead times, the period between the first order date and the first loading date, have decreased in recent days. Such a development is often supportive of freight rates and could be an offsetting factor to subdued cargo order volumes. A continued development along the recent trajectory could provide the panamax index with further upward momentum.
Still, the market lead times in the Atlantic and Pacific basins are coming down from high levels and remain elevated compared to the average. Hence, a reversal of the current trend towards more immediate demand could rapidly change the segment’s fortunes.
Recovering Demand in the Atlantic Fuelled by the South American Agricultural Trade
Weekly global cargo order volumes for the panamaxes have remained relatively stable over the past three weeks after a significant decline throughout May. While global aggregate volumes steadied around eighteen million tonnes, demand in the Indian Ocean and the Pacific softened. A minor recovery in ordering activities in the Atlantic basin kept the global numbers steady.
Over the past month, the panamaxes have benefitted from an improving demand situation for cargoes loading on South America’s east coast. The upward trend for cargo order volumes loading in the area has been supported by rising demand from the grain and oilseed trade, especially for shipments to the Far East. The development is likely part of a seasonal rebound. However, based on the patterns of recent years, the surge in demand should be relatively short-lived. Still, the positive momentum is likely to remain in place for a few more weeks, but after that, weaker demand could start to weigh on freight rates in the basin.
In conclusion, the short-term outlook for the panamaxes looks mixed, with several different factors potentially offsetting each other. While the current global demand and supply situation suggests that the segment may come under some seasonal pressure during the remainder of the month, other factors, such as an upward trend for demand in the Atlantic and a shift towards more immediate deliveries globally, could offer some mitigation.
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
