The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking cargo order data sets suggest that panamax freight rates will remain under pressure in the near term. Global aggregate demand was significantly lower in November than a year ago, with the Indian and Chinese seaborne coal trades weighing on total volumes. Still, declining market lead times coils offer some offset for soft demand.
Continued Woes for the Panamaxes Amid Soft Demand
Friday’s decline for the Baltic Exchange’s panamax freight index extended the current run of daily losses into an eleventh consecutive session. The recent headwinds have translated into the indicator shedding 15.4 per cent of its value in November, which, in turn, contributed to the index ending the month 52 per cent lower than a year ago.
Aggregate global cargo order volumes were 15.6 per cent lower in November this year than during the same month last year. In addition, unlike the previous year, global cargo order volumes fell month-on-month in November amid a four per cent decline compared to October.
Over the past four weeks, global weekly cargo order volumes have been trending lower, suggesting that the weak demand will extend into December. Last week, the global aggregate was more than twelve per cent lower than during the same period in 2023 and around twenty per cent lower than at the beginning of the month.
The headwinds for global demand have been fuelled by lower ordering activities for cargoes loading in the Indian Ocean and the Atlantic. In the former basin, the weekly average for November is nearly 29 per cent lower than a year ago, while the latter has seen a decline of 23 per cent for the period. On the other hand, demand in the Pacific has increased by eleven per cent.
While tonnage supply for the panamaxes declined last week in all the major basins, the weekly averages for the past month have been higher than during the same period 12 months ago. Also, compared to the long-term average for the past two years, supply in the Pacific remains elevated.
While last week’s decline in available panamaxes is a positive for the segment, the development is unlikely to provide any meaningful offset for continued weak demand. Hence, from a demand and supply perspective, the short-term outlook for the panamaxes and their freight index is one of continued headwinds.
Headwinds for the Coal Trade Contributing to Low Demand
At the same time as the freight gauge for the panamaxes has faced headwinds, coal prices have been under pressure. Since a brief but significant rally during the second half of September, the January Newcastle futures have declined by more than ten per cent over the past seven weeks. On Friday, the contracts settled at the lowest level since the middle of September. Falling Chinese demand for seaborne coal imports during the past month amid higher domestic production and greater use of alternative sources for electricity production have contributed to the price decline.
Recent weeks have seen a downward trend in panamax cargo order volumes for coal discharging in China and India, two of the world’s leading importers of the fossil fuel. With November fully behind us, the month’s aggregate cargo order volumes for the panamax coal trade to China and India were significantly lower than during the same period last year. For China, the year-on-year decline was 27 per cent, while Indian demand dropped by around 34 per cent. Still, compared to the two countries’ seaborne coal trades as a whole, the panamaxes have faced less stiff headwinds.
The past two weeks have seen Indian demand rebounding slightly, but the Chinese trade remains under pressure. Hence, the recent unseasonal weakness of the Chinese and Indian seaborne coal trades suggests that both panamax freight rates and coal prices will remain under pressure in the near future.
Declining Market Lead Times Offer Some Hope
As discussed above, the demand and supply situation for the panamaxes does not look promising at the moment. However, recent developments for market lead times in the Indian Ocean and the Atlantic may offer some light glimmers of hope. The time between the first circulation of an order and the first loading date has declined in recent weeks. While the Atlantic basin has seen the market lead times below the year’s average since the middle of October, the drop is more recent in the Indian Ocean. In contrast, the gauge has remained well above the average in the Pacific, highlighting the limited offset delivered by robust cargo order volumes in the basin.
While declining market lead times are often associated with a rise in freight rates, demand in the Indian Ocean and the Atlantic is subdued. Hence, any positive impact from the development is likely limited in the short term. However, it will weigh on the tonnage supplies in the basins, with support for freight rates in due course, should the situation remain unchanged. On the other hand, a situation with extended market lead times in the Pacific will weigh on freight rates in the basin, especially with an elevated tonnage supply.
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
