– Freight Market Report – Maret 2016
ICMA – Freight Market Report
(15 March 2016)
Grain Trade Lifts Vessel Earnings
Freight Market Overview
After falling to an all-time low of 290 points on 10 February, the Baltic
Exchange Dry Index has seen a modest rise to an eight-week high of 393
points on 14 March, driven by increases in the Panamax and geared vessels
market. However, this is still 80 points below the level at the start of 2016.
Strong grain exports from South America have helped average Panamax
earnings climb to the highest level since mid-November 2015 at $3,861/day,
however, to put this in perspective, this is still over $800/day below the yearago level. This weakness can be partly attributed to the sustained growth in
the 60,000-64,999 dwt Ultramax fleet, but also to weakness in seaborne coal
trade. There have been similar increases in the 52,000 dwt Supramax and
28,000 dwt Handysize 6 TC averages to $4,461/day and $3,750/day,
respectively.
Although earnings for the smaller vessels have improved, the Capesize (180k
dwt) 5 TC average has continued to fall, dropping to a new all-time low of
$2,158/day on 14 March. Losses have been concentrated in the Atlantic with
the round-voyage rate slipping below $2,000/day. After rising slightly at the
end of February, the Capesize one-year period rate has since retreated to a
record low of a mere $5,250/day. The Gladstone-Japan Capesize coal rate
has edged up to $3.20/t.
Dry Bulk Trade Developments
The main focus of the dry bulk market over the past month has been the main
South American grain export season, with SSY expecting a record quarter for
regional grain exports in the 2q16 due to the availability of competitively
priced soyabeans. In addition, Brazil exported an unseasonally high 5.4 Mt of
corn in February, up 4.3 Mt year-on-year and the third-highest month on
record. Elevated grain exports have been accompanied by port congestion.
The number of Panamaxes waiting to load grain cargoes at Brazilian ports
climbed to the highest level since 2013 on 10 March at around 100 vessels,
according to local sources. This is more than double the year-ago level of 40
vessels, and compares with 83 vessels at the same point in 2014.
The positive impact of strong grain trade on freight rates has been
constrained by further signs of weakness in the coal market, as evidenced by
trade data. Chinese coal imports dropped to a near five-year low in February
at 13.5 Mt, and coal exports from the US (excluding cargoes to Canada) fell to
the lowest level in over six years in January at 3.7 Mt, down 3.1 Mt year-onyear. Coking coal exports from Canada (excluding exports to the US) also
-1-
slumped to a three-month low of 2.1 Mt in January, chiefly to the detriment of
Capesize and Panamax demand.
In the first two months of the year Chinese imports of iron ore totalled 155.8
Mt, which marks a year-on-year gain of almost 9 Mt at a time when China’s
crude steel production fell 5.7%. This highlights the role played by import
substitution in generating iron ore import growth into China, with domestic ore
being displaced from the market.
A compensation agreement between Samarco and Brazilian authorities raises
the prospect of increased Brazilian iron ore exports towards the end of the
year with the company aiming for a partial restart iron ore pellet production in
the 4q16. Samarco advises that output for the first 2-3 years after restart
would “likely” be 19 Mtpa, as opposed to the 30.5 Mtpa of pellet production
capacity achieved prior to November’s dam failure.
Fleet Supply Developments
The pace of fleet growth slowed in February as newbuilding deliveries
retreated from the three-year high recorded in January and demolition interest
remained high in the face of average charter rates remaining below vessel
operating costs in all dry bulk carrier sectors.
Much of this year’s scrapping activity has been concentrated in the Capesize
and Panamax fleets. Panamax deletions recorded a third successive monthly
all-time high (of 20 vessels) in February, with 10 Capesize vessels removed
from service, the highest total since May 2015. This contributed to deletions
across the entire dry bulk carrier fleet reaching a nine-month high of 3.9 Mdwt
in February.
Turning to newbuilding deliveries, the 4.8 Mdwt of newbuild capacity added
last month marked a sharp slowdown from January’s 8.6 Mdwt. Significantly,
however, the January/February combined total is higher than the
corresponding figure for 2015. The rate of non-delivery from the scheduled
orderbook remains an area of uncertainty, but the year-on-year increase in
deliveries underlines the scale of this year’s newbuilding delivery programme.
As mentioned earlier, net growth has been fastest in percentage terms in the
40,000-64,999 dwt Handymax fleet where deliveries of 60,000-64,999 dwt
Ultramax designs dominate. As a result of these developments, net fleet
expansion slowed from January’s 12-month high of 4.8 Mdwt to 0.9 Mdwt in
February.
Despite frequent reports of intensifying interest dry bulk carriers entering layup, SSY estimates less than 1% of the bulker fleet is in full lay-up worldwide
at present.
Market Outlook – Freight Futures
-2-
The Panamax freight futures (FFA) market has seen contract prices increase
in tandem with the small improvements in the spot physical market. The
March-December 2016 contract price for the Panamax 4 TC average was
trading around $4,800/day on 14 March. However, this is still below where it
was at the start of the year. The Mar-Dec contract price for the Capesize
(172k dwt) 4 TC average was priced at $5,150/day.
SSY Consultancy & Research
15 March 2016
Whilst care has been taken to ensure that the information contained in this report is
accurate, it is supplied without guarantee. SSY Consultancy & Research Ltd can
accept no responsibility for any errors or omissions or any consequences arising
therefrom. The views expressed are those of SSY Consultancy & Research Ltd and
do not necessarily reflect the views of any other associated company.
-3-
-4-
(15 March 2016)
Grain Trade Lifts Vessel Earnings
Freight Market Overview
After falling to an all-time low of 290 points on 10 February, the Baltic
Exchange Dry Index has seen a modest rise to an eight-week high of 393
points on 14 March, driven by increases in the Panamax and geared vessels
market. However, this is still 80 points below the level at the start of 2016.
Strong grain exports from South America have helped average Panamax
earnings climb to the highest level since mid-November 2015 at $3,861/day,
however, to put this in perspective, this is still over $800/day below the yearago level. This weakness can be partly attributed to the sustained growth in
the 60,000-64,999 dwt Ultramax fleet, but also to weakness in seaborne coal
trade. There have been similar increases in the 52,000 dwt Supramax and
28,000 dwt Handysize 6 TC averages to $4,461/day and $3,750/day,
respectively.
Although earnings for the smaller vessels have improved, the Capesize (180k
dwt) 5 TC average has continued to fall, dropping to a new all-time low of
$2,158/day on 14 March. Losses have been concentrated in the Atlantic with
the round-voyage rate slipping below $2,000/day. After rising slightly at the
end of February, the Capesize one-year period rate has since retreated to a
record low of a mere $5,250/day. The Gladstone-Japan Capesize coal rate
has edged up to $3.20/t.
Dry Bulk Trade Developments
The main focus of the dry bulk market over the past month has been the main
South American grain export season, with SSY expecting a record quarter for
regional grain exports in the 2q16 due to the availability of competitively
priced soyabeans. In addition, Brazil exported an unseasonally high 5.4 Mt of
corn in February, up 4.3 Mt year-on-year and the third-highest month on
record. Elevated grain exports have been accompanied by port congestion.
The number of Panamaxes waiting to load grain cargoes at Brazilian ports
climbed to the highest level since 2013 on 10 March at around 100 vessels,
according to local sources. This is more than double the year-ago level of 40
vessels, and compares with 83 vessels at the same point in 2014.
The positive impact of strong grain trade on freight rates has been
constrained by further signs of weakness in the coal market, as evidenced by
trade data. Chinese coal imports dropped to a near five-year low in February
at 13.5 Mt, and coal exports from the US (excluding cargoes to Canada) fell to
the lowest level in over six years in January at 3.7 Mt, down 3.1 Mt year-onyear. Coking coal exports from Canada (excluding exports to the US) also
-1-
slumped to a three-month low of 2.1 Mt in January, chiefly to the detriment of
Capesize and Panamax demand.
In the first two months of the year Chinese imports of iron ore totalled 155.8
Mt, which marks a year-on-year gain of almost 9 Mt at a time when China’s
crude steel production fell 5.7%. This highlights the role played by import
substitution in generating iron ore import growth into China, with domestic ore
being displaced from the market.
A compensation agreement between Samarco and Brazilian authorities raises
the prospect of increased Brazilian iron ore exports towards the end of the
year with the company aiming for a partial restart iron ore pellet production in
the 4q16. Samarco advises that output for the first 2-3 years after restart
would “likely” be 19 Mtpa, as opposed to the 30.5 Mtpa of pellet production
capacity achieved prior to November’s dam failure.
Fleet Supply Developments
The pace of fleet growth slowed in February as newbuilding deliveries
retreated from the three-year high recorded in January and demolition interest
remained high in the face of average charter rates remaining below vessel
operating costs in all dry bulk carrier sectors.
Much of this year’s scrapping activity has been concentrated in the Capesize
and Panamax fleets. Panamax deletions recorded a third successive monthly
all-time high (of 20 vessels) in February, with 10 Capesize vessels removed
from service, the highest total since May 2015. This contributed to deletions
across the entire dry bulk carrier fleet reaching a nine-month high of 3.9 Mdwt
in February.
Turning to newbuilding deliveries, the 4.8 Mdwt of newbuild capacity added
last month marked a sharp slowdown from January’s 8.6 Mdwt. Significantly,
however, the January/February combined total is higher than the
corresponding figure for 2015. The rate of non-delivery from the scheduled
orderbook remains an area of uncertainty, but the year-on-year increase in
deliveries underlines the scale of this year’s newbuilding delivery programme.
As mentioned earlier, net growth has been fastest in percentage terms in the
40,000-64,999 dwt Handymax fleet where deliveries of 60,000-64,999 dwt
Ultramax designs dominate. As a result of these developments, net fleet
expansion slowed from January’s 12-month high of 4.8 Mdwt to 0.9 Mdwt in
February.
Despite frequent reports of intensifying interest dry bulk carriers entering layup, SSY estimates less than 1% of the bulker fleet is in full lay-up worldwide
at present.
Market Outlook – Freight Futures
-2-
The Panamax freight futures (FFA) market has seen contract prices increase
in tandem with the small improvements in the spot physical market. The
March-December 2016 contract price for the Panamax 4 TC average was
trading around $4,800/day on 14 March. However, this is still below where it
was at the start of the year. The Mar-Dec contract price for the Capesize
(172k dwt) 4 TC average was priced at $5,150/day.
SSY Consultancy & Research
15 March 2016
Whilst care has been taken to ensure that the information contained in this report is
accurate, it is supplied without guarantee. SSY Consultancy & Research Ltd can
accept no responsibility for any errors or omissions or any consequences arising
therefrom. The views expressed are those of SSY Consultancy & Research Ltd and
do not necessarily reflect the views of any other associated company.
-3-
-4-