The Baltic Dry index continues its rather depressed performance, in spite of a small 4% gain. Leading indicators, Capesize and Panamax sectors, demonstrate a stagnant market at the moment. Capesize rates were stuck at $8.5k and Panamax at $5k. Only Supramaxes saw some improvement, with a 10% rise in rates. Thus far this quarter, Panamax spot rates are more than 60% year to date. A primary cause is China’s declining coal imports, down 4% from this time a year ago. Industry analysts are holding out for some improvement in the fall and fourth quarter of this year resulting from the typical upswing in electricity use in China during the summer months, which should result in more coal usage and a depletion of current coal stockpiles. However, at the same time, electricity producers have been pushing for less coal consumption, prompting imports of cleaner, more energy efficient coal. Their timing is excellent as current global prices for coal are dropping, which is impacting shipping vessel freight performance. Iron ore shipping is doing a bit better, showing good strength with 145 spot Capesize charters in this last four-week period, an increase of 4 charters from the previous four weeks. The winner here continues to be Australia which is succeeding in squeezing out other countries. For instance, over the first weeks of August, Australia sent out 17 charters while Brazil sent only two.
Forecasters expected a robust performance in the dry bulk shipping market for the second half of 2014, but a market recovery has failed as of yet to materialize. A number of less than favorable variables have eroded those early predictions. Factors such as a steep drop in iron ore prices, by as much as $40 per ton since the year’s start, were thought to increase iron ore movement, but record-breaking stockpiles of iron ore at China’s ports and Australia’s emergence as a pre-eminent iron ore supplier have precipitated a steady decline in BDI. By mid-month, BDI was down by 10% standing at 732 points, continuing its slow decline. Shipping vessel rates followed suit, with the Panamax below $5kpd and Capesize below $9kpd. Australia’s spot charters are up by 31% from the same time a year ago, negatively impacting the performance of Brazilian and other shipping countries. Adding to the fire is China’s decreasing coal imports and growing coal stockpiles, such as at Qingdao port where stockpiles are up by 47% from the beginning of the year. Chinese regulators have tightened up trade financing regulations, negatively impacting the performance of Panamax and Capesize, with year to date losses of 68% and 78% respectively. A weakened Chinese housing market is also not helping. Continue reading
After April’s rather discouraging picture for Capesize rates, shippers are happy to see some significant improvement this month. The demand for steel in China continues to grow, resulting in improved margins for domestic steel mills and pushing up crude steel production to 832m tons, record levels. Iron ore stocks of 110m at ports were giving much cause for worry but now that iron ore inventories at the mills have hit record lows, fears have eased considerably. Imported iron ore prices have fallen by 8.4% and HRC prices have risen by 1.7% MoM. The picture for grain shipments from South America was fairly abysmal in the first quarter. Argentinian exports were down 35% from the same time last year, to less than 10mt, with cargoes remaining at ports. All of this pushed down Panamax rates, which remained weak at $7kpd. Nevertheless, market analysts expect grain shipments to increase, contributing to an optimistic outlook for second half 2104 within the industry.
Despite a free fall in the BDI since the beginning of the year, most forecasters are still optimistic that dry bulk shipping will be better than in 2012 and 2013. Since January 2, the first day of 2014 that the BCI was published, rates have tumbled to two-thirds, falling from over $35,000 per day to just over $10,000 per day.
Capesizes in particular, the largest segment of dry bulk carriers published by the Baltic Exchange, fell in large part due to unexpectedly poor weather which interfered with iron ore loading operations in key countries and ports for iron ore export in Australia and Brazil. There is also the seasonal downturn with Chinese New Year just around the corner, and so the slide, to some degree, is seasonal and was to be expected. Continue reading