– Freight Market Report – September 2015
Coal Asia – Freight Market Report
(07 September 2015)
Bunker Price Falls Accentuate Freight Market Falls
Freight Market Overview
A downturn in the freight market has been accentuated by another drop in
bunker fuel prices to lead voyage rates sharply lower. As the accompanying
charts show, the Capesize spot rate from Gladstone to Japan has slumped by
$3.65/t since the first week of August to finish the month at $6.25/t, a fourmonth low. In terms of timecharter rates, which exclude bunker costs, the
average for 180,000 dwt vessels has dropped from a 2015 high of
$20,601/day on 5 August to below $8,300/day by the end of August,
according to Baltic Exchange assessments.
The indicative spot rate from East Kalimantan to East Coast India has
retreated to a four-month low of $4.85/t, which also represents a four-month
low. The drop in TC rates has been modest in comparison with the volatile
Capesize sector, with the average at the end of August standing at
$7,766/day compared with $8,400/day two weeks earlier.
For 52,000 dwt Supramaxes, average vessel earnings has demonstrated
some resilience in the face of rate declines for larger bulkers outlined above.
The average of the 6 TC rates at the end of August was around $9,700/day,
having risen from less than $9,400/day at the start of the month.
Dry Bulk Trade Developments
Chinese data for July indicated a sharp jump in iron ore imports, but also
implied a drop in iron ore consumption. July crude steel production in China
fell by 4.6% on an annual basis the first fall of more than 4% since 2010. This
contributed to a worldwide decline of 3.8% as global output slipped to its
lowest level since the short month of February this year. China’s steel
production will be impacted in the north of the country by anti-pollution
measures ahead of the Second World War anniversary parade in Beijing in
early September. Apparent steel demand in China fell 8.1% year-on-year in
July, the weakest performance of 2015.
Steel prices in China rose in early August, but have since come under
negative pressure. A better indication of underlying demand will emerge later
in September, but confidence has been shaken by the slumping Shanghai
Composite and disappointing lead economic indicators.
A monthly 2015 high for Brazil’s iron ore exports of 34.0 Mt in July, which
helped lift the Capesize market was followed by a drop in chartering activity.
Grain remains the main positive influence on Panamax demand with coal
volumes staying weak in comparison. The US Department of Agriculture
-1-
(USDA) has lifted its 2015/16 (Oct-Sep) coarse grain export forecast for Brazil
by 1.5 Mt from July to a record 28.0 Mt. This follows exceptional Brazilian
grain exports in May-July, when the combined 3-month total for soya and corn
of 34.3 Mt was up 33.5% year-on-year. The USDA has forecast record
Russian/Ukrainian wheat exports of a combined 36 Mt in 2015/16 (July-June)
and raised coarse grain by 4 Mt to 29.5 Mt (Oct-Sep).
Although a devalued Chinese currency could discourage coal imports further
(already down 62 Mt annually to 121 Mt in Jan-July) and may encourage
exports of steel (which were up 13 Mt to 62 Mt in Jan-July) and potentially of
coal, much will depend on whether this is a one-off adjustment, as stated by
the People’s Bank of China, or the start of an extended period of currency
depreciation.
In addition to grain, Supramax demand has been supported by robust steel
trade volumes. Having overtaken Japan in 2011 and seeing volumes rise to
double those of Japan last year, Chinese steel exports have recorded further
annual increases from 2014’s record, despite some tightening on export tax
rebate eligibility by the PRC government at the start of the year. July’s 9.7 Mt
brought year-to-date exports to 62.2 Mt, a sizeable annual gain of 13.1 Mt or
27%. he first seven months of 2015. Meanwhile Brazil’s steel exports hit a 13year high of 1.5 Mt in July.
Fleet Supply Developments
After months of contraction, positive Capesize fleet growth in dwt terms in
relation to 1 January 2015 has finally returned, with SSY fleet data revealing
year-to-date deliveries of 11.78 Mdwt (60 vessels) compared with ytd
deletions from the Cape fleet of 11.15 Mdwt (67 vessels). There has been net
growth of 0.2% since the turn of the year, the slowest expansion of the four
main bulker sizes. In contrast, at this stage last year corresponding Cape net
fleet growth was up 3.1%.
Cape demolition activity in July/August has so far been limited to two vessels
(with another five due for scrap), while newbuilding deliveries have numbered
14. The recent drop in demolition follows (1) appreciating secondhand ship
values (including price rises for older tonnage), (2) July being the strongest
month for the Panamax 4 TCs since November last year and (3) low ship
scrap prices. The latest Baltic Exchange Demolition Assessment (BDA) for
the Indian Sub-Continent was $302/lwt, the lowest assessment since 2009.
Nine newbuilding deliveries in July took the ytd total for Panamaxes to 88,
compared with 119 in the first seven months of 2014.
Resulting net growth of 1.7% in the Panamax fleet since 1 January overlooks
the scale of competition from the 40,000-64,999 Handymax sector. Handymax
net fleet expansion was 4.2% in the ytd, with growth boosted by 126 Ultramax
newbuilding deliveries (of 60,000-64,999 dwt) since the turn of the year.
-2-
Market Outlook – Freight Futures
The freight futures contract for the Capesize 4 TC average (172,000 dwt
vessels) was trading around $13,000/day for the 4q15 and $10,275/day for
the calendar year 2016 at close of business on 28 August. The Panamax
equivalent for the 4q15 was priced at $7,350/day and $7,000/day for the 2016
calendar year.
SSY Consultancy & Research
31 August 2015
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.
Panamax Coal Spot Freight Rates
$30
Indonesia-Qingdao
E.Kalimantan-Krishnapatnam
$25
Newcastle-Qingdao
$15
$10
$5
Source: SSY
-3-
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
$0
May-10
USD/t
$20
-4Aug-15
May-15
Feb-15
Nov-14
Aug-14
Newcastle-Qingdao
Richards Bay-Qingdao
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
$25
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
May-10
USD/t
Capesize Coal Spot Freight Rates
$30
Gladstone-Japan
Newcastle-Zhoushan
$20
$15
$10
$5
Source: SSY
$0
(07 September 2015)
Bunker Price Falls Accentuate Freight Market Falls
Freight Market Overview
A downturn in the freight market has been accentuated by another drop in
bunker fuel prices to lead voyage rates sharply lower. As the accompanying
charts show, the Capesize spot rate from Gladstone to Japan has slumped by
$3.65/t since the first week of August to finish the month at $6.25/t, a fourmonth low. In terms of timecharter rates, which exclude bunker costs, the
average for 180,000 dwt vessels has dropped from a 2015 high of
$20,601/day on 5 August to below $8,300/day by the end of August,
according to Baltic Exchange assessments.
The indicative spot rate from East Kalimantan to East Coast India has
retreated to a four-month low of $4.85/t, which also represents a four-month
low. The drop in TC rates has been modest in comparison with the volatile
Capesize sector, with the average at the end of August standing at
$7,766/day compared with $8,400/day two weeks earlier.
For 52,000 dwt Supramaxes, average vessel earnings has demonstrated
some resilience in the face of rate declines for larger bulkers outlined above.
The average of the 6 TC rates at the end of August was around $9,700/day,
having risen from less than $9,400/day at the start of the month.
Dry Bulk Trade Developments
Chinese data for July indicated a sharp jump in iron ore imports, but also
implied a drop in iron ore consumption. July crude steel production in China
fell by 4.6% on an annual basis the first fall of more than 4% since 2010. This
contributed to a worldwide decline of 3.8% as global output slipped to its
lowest level since the short month of February this year. China’s steel
production will be impacted in the north of the country by anti-pollution
measures ahead of the Second World War anniversary parade in Beijing in
early September. Apparent steel demand in China fell 8.1% year-on-year in
July, the weakest performance of 2015.
Steel prices in China rose in early August, but have since come under
negative pressure. A better indication of underlying demand will emerge later
in September, but confidence has been shaken by the slumping Shanghai
Composite and disappointing lead economic indicators.
A monthly 2015 high for Brazil’s iron ore exports of 34.0 Mt in July, which
helped lift the Capesize market was followed by a drop in chartering activity.
Grain remains the main positive influence on Panamax demand with coal
volumes staying weak in comparison. The US Department of Agriculture
-1-
(USDA) has lifted its 2015/16 (Oct-Sep) coarse grain export forecast for Brazil
by 1.5 Mt from July to a record 28.0 Mt. This follows exceptional Brazilian
grain exports in May-July, when the combined 3-month total for soya and corn
of 34.3 Mt was up 33.5% year-on-year. The USDA has forecast record
Russian/Ukrainian wheat exports of a combined 36 Mt in 2015/16 (July-June)
and raised coarse grain by 4 Mt to 29.5 Mt (Oct-Sep).
Although a devalued Chinese currency could discourage coal imports further
(already down 62 Mt annually to 121 Mt in Jan-July) and may encourage
exports of steel (which were up 13 Mt to 62 Mt in Jan-July) and potentially of
coal, much will depend on whether this is a one-off adjustment, as stated by
the People’s Bank of China, or the start of an extended period of currency
depreciation.
In addition to grain, Supramax demand has been supported by robust steel
trade volumes. Having overtaken Japan in 2011 and seeing volumes rise to
double those of Japan last year, Chinese steel exports have recorded further
annual increases from 2014’s record, despite some tightening on export tax
rebate eligibility by the PRC government at the start of the year. July’s 9.7 Mt
brought year-to-date exports to 62.2 Mt, a sizeable annual gain of 13.1 Mt or
27%. he first seven months of 2015. Meanwhile Brazil’s steel exports hit a 13year high of 1.5 Mt in July.
Fleet Supply Developments
After months of contraction, positive Capesize fleet growth in dwt terms in
relation to 1 January 2015 has finally returned, with SSY fleet data revealing
year-to-date deliveries of 11.78 Mdwt (60 vessels) compared with ytd
deletions from the Cape fleet of 11.15 Mdwt (67 vessels). There has been net
growth of 0.2% since the turn of the year, the slowest expansion of the four
main bulker sizes. In contrast, at this stage last year corresponding Cape net
fleet growth was up 3.1%.
Cape demolition activity in July/August has so far been limited to two vessels
(with another five due for scrap), while newbuilding deliveries have numbered
14. The recent drop in demolition follows (1) appreciating secondhand ship
values (including price rises for older tonnage), (2) July being the strongest
month for the Panamax 4 TCs since November last year and (3) low ship
scrap prices. The latest Baltic Exchange Demolition Assessment (BDA) for
the Indian Sub-Continent was $302/lwt, the lowest assessment since 2009.
Nine newbuilding deliveries in July took the ytd total for Panamaxes to 88,
compared with 119 in the first seven months of 2014.
Resulting net growth of 1.7% in the Panamax fleet since 1 January overlooks
the scale of competition from the 40,000-64,999 Handymax sector. Handymax
net fleet expansion was 4.2% in the ytd, with growth boosted by 126 Ultramax
newbuilding deliveries (of 60,000-64,999 dwt) since the turn of the year.
-2-
Market Outlook – Freight Futures
The freight futures contract for the Capesize 4 TC average (172,000 dwt
vessels) was trading around $13,000/day for the 4q15 and $10,275/day for
the calendar year 2016 at close of business on 28 August. The Panamax
equivalent for the 4q15 was priced at $7,350/day and $7,000/day for the 2016
calendar year.
SSY Consultancy & Research
31 August 2015
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.
Panamax Coal Spot Freight Rates
$30
Indonesia-Qingdao
E.Kalimantan-Krishnapatnam
$25
Newcastle-Qingdao
$15
$10
$5
Source: SSY
-3-
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
$0
May-10
USD/t
$20
-4Aug-15
May-15
Feb-15
Nov-14
Aug-14
Newcastle-Qingdao
Richards Bay-Qingdao
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
$25
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
May-10
USD/t
Capesize Coal Spot Freight Rates
$30
Gladstone-Japan
Newcastle-Zhoushan
$20
$15
$10
$5
Source: SSY
$0