The Dry Bulk Weekly Review in Shipfix Data
In the past week, Shipfix's forward-looking data sets have indicated that Chinese coal imports will remain robust but at levels below recent months. Elsewhere, volatile cargo order volumes for rice have fuelled large swings in market prices. Continued pressure on demand for Supramaxes has contributed to lower freight rates, with falling tonnage supply insufficient to offset the development.
Lower Demand for Seaborne Imports of Coal to China to Weigh on Volumes Discharged during Final Months of the Year
According to recent data from the IEA, Chinese coal imports nearly doubled during the first half of the year. However, the robust growth was helped by base effects, as Covid lockdowns hampered imports during the first six months of 2022. Still, while the reopening of the Chinese economy following the removal of the strict anti-Covid policies has delivered underwhelming growth, the higher growth rates have nevertheless spurred demand for the dirtiest of fossil fuels.
Still, China’s seaborne coal imports may moderate somewhat during the year's second half. Shipfix’s forward-looking cargo order data have seen recent weekly volumes stabilising below the second quarter's. During the previous quarter, average weekly volumes topped ten million tonnes, but for July, the average has retreated by around ten per cent. Hence, given the time lag between ordering and actual cargo discharge, the import volumes of the first half of the year are unlikely to be repeated during the year's final months.
The spot market for Chinese seaborne coal imports continues to be dominated by shipments from sources relatively nearby. Indonesia has, by far, the largest market share, but demand for seaborne transportation from Russia’s ports in the Far East remains significant. The relatively short distances for a large part of the Chinese coal imports have favoured smaller and mid-sized vessels, with average cargo sizes from Indonesia remaining reasonably stable at around 60,000 tonnes. On the other hand, the typical cargo size for shipments from Russia has been trending lower in the past three months and remain below 50,000 tonnes.
Low Global Order Volumes for Rice Supportive of High Prices
US September rough rice futures have seen continued volatility during July and early August, with the contracts gaining nearly ten per cent during the middle of the month. However, the contracts have come under renewed pressure during the past week, with losses exceeding four per cent. While prices are below recent highs, they remain high in a historical context. Prices have been supported by concerns over global supplies amid poor growing conditions in some key regions and Indian export restrictions.
Aggregate cargo orders for rice loading globally have fallen from 5.1 million tonnes in July last year to 2.2 million tonnes during the same month this year. The 56 per cent year-on-year drop will continue to support elevated rice prices. While a minor monthly increase in July may have contributed to the recent price volatility, the volumes remain depressed compared to recent years. Also, the increase resulted from a rise in volumes during one week in the middle of the month. Hence, as the demand for seaborne transportation of rice has retreated since the middle of the month, prices will likely be on an upward trajectory in the near term.
Headwinds for Cargo Order Volumes for Supramaxes Weigh on Freight Rates
The Baltic Exchange’s freight rate indicator for the Supramaxes has almost halved since its high for the year in late March. After staging a minor recovery amid higher demand during the first two weeks of July, the segment's index declined during the past fortnight. Following the brief peak in demand at the beginning of July, aggregate weekly cargo order volumes have been trending lower. A decrease in vessel supply has been insufficient to offset falling demand and support freight rates.
The lower demand for seaborne transportation onboard Supramaxes was, to a great extent, driven by falling coal volumes. Weekly cargo order volumes for the fossil fuel have been declining over the past month, with the 7.8 million tonnes recorded last week nearly 50 per cent below the level seen at the beginning of July. However, not only coal weighed on the demand for Supramaxes. The segment has also seen a 23 per cent decrease in demand during the past month for shipments of agricultural commodities. Hence, as the two cargoes account for nearly half of the total order volumes, a recovery for the freight rates in the segment remains dependent on a rebound in demand for seaborne transportation of coal and agricultural commodities.
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