– Freight Market Report – April 2016
ICMA – Freight Market Report
(15 April 2016)
Vessel Earnings Move To Year-to-Date Highs
Freight Market Overview
The benchmark Baltic Exchange Dry Index rose from an all-time low of 290
points in early February to 597 points on 14 April, as average vessel earnings
across the four dry bulk carrier sizes reached year-to-date highs. Even though
this marks the first time in 2016 that the BDI has risen above the year-ago
level, vessel earnings remain depressed by historical standards. The 1q16
average for the BDI of 358 points was the lowest quarterly average since the
BDI inception in 1985, and remains short of last year’s annual average of 718.
Average earnings for 180k dwt Capesizes 5 TC average reached climbed to
the highest level of 2016 at $6,184/day, a sudden gain from $2,518/day just
two weeks earlier. The rising spot market has fed through to the period market
with the Cape one-year period rate climbing to $6,500/day, up $1,250/day
month-on-month, although this compares with a year-ago level of
$10,000/day.
At $5,577/day, Panamax average earnings also stand at a 2016-high, chiefly
thanks to the Panamax Atlantic round voyage climbing to a seven-month high
of $7,027/day from $4,173/day at the beginning of March. The Atlantic round
voyage is now at a premium of over $2,300/day to its Pacific equivalent.
Average earnings for Supramax vessels of 52,000 dwt have climbed to
$5,374/day. As with the Panamax market, rate gains have been most
apparent in the Atlantic basin. The Indonesia-East Coast India S8 route
assessed by the Baltic Exchange has risen to $4,497/day, another 2016-high.
Dry Bulk Trade Developments
Trade data show iron ore trade volumes were already strong before an upturn
in chartering supported the rise in Capes at the start of April. Australian iron
ore exports have demonstrated growth in the first two months of the year
while exports from Australia’s largest iron ore terminal of Port Hedland
climbed to a monthly all-time high of 39.5 Mt in March, up 8% year-on-year.
Iron ore export data from the Brazilian government indicate a substantial gain
in this year’s shipments. The 1q16 total of 85.3 Mt is up 6.0 Mt on the 1q15.
Chinese iron ore imports climbed to a three-month high of 85.8 Mt in March.
Although stockpiles of iron ore at 42 Chinese ports increased to their highest
level in a year at over 100 Mt, Chinese crude steel production in March rose
on an annual basis for the first time since December 2014, climbing almost
3% year-on-year to 70.7 Mt to the third-highest monthly total on record.
Domestic steel prices have jumped in recent months with the World Steel
-1-
Dynamics Chinese domestic price for hot rolled band surging to a twelvemonth high of $352/t in mid-April. This over $100/t higher than the midFebruary price.
Panamax and Supramax demand continues to be driven by strong South
American grain exports, with a record 2q in prospect. Brazil’s exports of soya
and corn combined surged to a record 11.9 Mt in March, up 56% year-onyear, as soya shipments rose to an eight-month high of 9.9 Mt.
However, the boost to earnings from the grain trade continues to be tempered
by coal trade developments. Panamax demand in the Atlantic has been
impacted by the ongoing falls in US coal exports (excluding Canadian
cargoes), which declined by a third to 3.9 Mt in February, as steam coal
exports slumped to a six-year low. UK coal imports fell 2.2 Mt year-on-year to
1.0 Mt in February, the second lowest month in the last 16 years. After three
strong months for exports, Colombian steam coal exports fell in March,
although shipments to Asia rose to a near four-year high of 0.8 Mt on
increased exports to India, a significant boost to tonne-mile demand.
Geared vessel demand in the Pacific has suffered from the Malaysian bauxite
mining ban in place since January. China imported 24 Mt of bauxite from
Malaysia last year, but only stockpiled ore is currently being shipped.
Furthermore, the start of 2016 saw a slowing in the previously strong global
steel trade with combined shipments from China, Japan, South Korea, the EU
and Brazil in the 1q16 estimated to be the lowest quarterly total since the
1q15.
Fleet Supply Developments
Net fleet growth across the dry bulk fleet slowed to the lowest level since
December 2015 in March at under 0.1 Mdwt as demolition activity countered
newbuilding additions. Last month also saw the second-highest month for
Capesize deletions on record with 15 vessels (2.7 Mdwt) scrapped, with an
additional 19 vessels yet to arrive at the demolition yard. A further 16
Panamax vessels (1.1 Mdwt) were removed from the fleet last month,
continuing the robust pace seen since December.
Net fleet growth was strongest in the Handymax/Supramax fleet of 40,00064,999 dwt, primarily as a result of the high arrivals of new Ultramax designs
of 60,000-64,999 dwt. Consequently, the Handymax/Supramax fleet has
expanded by 1.7% since the start of 2016, with Handysize net fleet growth at
1.1%. The Panamax fleet has witnessed zero growth, with Capesize net
expansion at 0.6%.
Market Outlook – Freight Futures
The rise in the physical freight market has been matched by increases in
Capesize and Panamax freight futures (FFA). The April-December 2016 FFA
-2-
contract price for the Capesize (172k dwt) was trading at around $7,400/day
on 14 April, up from around $5,600/day on 17 March when Capesize physical
spot earnings were at an all-time low. There has been a smaller increase in
the equivalent contract for the Panamax 4 TC average which has risen to near
$5,600/day.
SSY Consultancy & Research
15 April 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 April 2016)
Vessel Earnings Move To Year-to-Date Highs
Freight Market Overview
The benchmark Baltic Exchange Dry Index rose from an all-time low of 290
points in early February to 597 points on 14 April, as average vessel earnings
across the four dry bulk carrier sizes reached year-to-date highs. Even though
this marks the first time in 2016 that the BDI has risen above the year-ago
level, vessel earnings remain depressed by historical standards. The 1q16
average for the BDI of 358 points was the lowest quarterly average since the
BDI inception in 1985, and remains short of last year’s annual average of 718.
Average earnings for 180k dwt Capesizes 5 TC average reached climbed to
the highest level of 2016 at $6,184/day, a sudden gain from $2,518/day just
two weeks earlier. The rising spot market has fed through to the period market
with the Cape one-year period rate climbing to $6,500/day, up $1,250/day
month-on-month, although this compares with a year-ago level of
$10,000/day.
At $5,577/day, Panamax average earnings also stand at a 2016-high, chiefly
thanks to the Panamax Atlantic round voyage climbing to a seven-month high
of $7,027/day from $4,173/day at the beginning of March. The Atlantic round
voyage is now at a premium of over $2,300/day to its Pacific equivalent.
Average earnings for Supramax vessels of 52,000 dwt have climbed to
$5,374/day. As with the Panamax market, rate gains have been most
apparent in the Atlantic basin. The Indonesia-East Coast India S8 route
assessed by the Baltic Exchange has risen to $4,497/day, another 2016-high.
Dry Bulk Trade Developments
Trade data show iron ore trade volumes were already strong before an upturn
in chartering supported the rise in Capes at the start of April. Australian iron
ore exports have demonstrated growth in the first two months of the year
while exports from Australia’s largest iron ore terminal of Port Hedland
climbed to a monthly all-time high of 39.5 Mt in March, up 8% year-on-year.
Iron ore export data from the Brazilian government indicate a substantial gain
in this year’s shipments. The 1q16 total of 85.3 Mt is up 6.0 Mt on the 1q15.
Chinese iron ore imports climbed to a three-month high of 85.8 Mt in March.
Although stockpiles of iron ore at 42 Chinese ports increased to their highest
level in a year at over 100 Mt, Chinese crude steel production in March rose
on an annual basis for the first time since December 2014, climbing almost
3% year-on-year to 70.7 Mt to the third-highest monthly total on record.
Domestic steel prices have jumped in recent months with the World Steel
-1-
Dynamics Chinese domestic price for hot rolled band surging to a twelvemonth high of $352/t in mid-April. This over $100/t higher than the midFebruary price.
Panamax and Supramax demand continues to be driven by strong South
American grain exports, with a record 2q in prospect. Brazil’s exports of soya
and corn combined surged to a record 11.9 Mt in March, up 56% year-onyear, as soya shipments rose to an eight-month high of 9.9 Mt.
However, the boost to earnings from the grain trade continues to be tempered
by coal trade developments. Panamax demand in the Atlantic has been
impacted by the ongoing falls in US coal exports (excluding Canadian
cargoes), which declined by a third to 3.9 Mt in February, as steam coal
exports slumped to a six-year low. UK coal imports fell 2.2 Mt year-on-year to
1.0 Mt in February, the second lowest month in the last 16 years. After three
strong months for exports, Colombian steam coal exports fell in March,
although shipments to Asia rose to a near four-year high of 0.8 Mt on
increased exports to India, a significant boost to tonne-mile demand.
Geared vessel demand in the Pacific has suffered from the Malaysian bauxite
mining ban in place since January. China imported 24 Mt of bauxite from
Malaysia last year, but only stockpiled ore is currently being shipped.
Furthermore, the start of 2016 saw a slowing in the previously strong global
steel trade with combined shipments from China, Japan, South Korea, the EU
and Brazil in the 1q16 estimated to be the lowest quarterly total since the
1q15.
Fleet Supply Developments
Net fleet growth across the dry bulk fleet slowed to the lowest level since
December 2015 in March at under 0.1 Mdwt as demolition activity countered
newbuilding additions. Last month also saw the second-highest month for
Capesize deletions on record with 15 vessels (2.7 Mdwt) scrapped, with an
additional 19 vessels yet to arrive at the demolition yard. A further 16
Panamax vessels (1.1 Mdwt) were removed from the fleet last month,
continuing the robust pace seen since December.
Net fleet growth was strongest in the Handymax/Supramax fleet of 40,00064,999 dwt, primarily as a result of the high arrivals of new Ultramax designs
of 60,000-64,999 dwt. Consequently, the Handymax/Supramax fleet has
expanded by 1.7% since the start of 2016, with Handysize net fleet growth at
1.1%. The Panamax fleet has witnessed zero growth, with Capesize net
expansion at 0.6%.
Market Outlook – Freight Futures
The rise in the physical freight market has been matched by increases in
Capesize and Panamax freight futures (FFA). The April-December 2016 FFA
-2-
contract price for the Capesize (172k dwt) was trading at around $7,400/day
on 14 April, up from around $5,600/day on 17 March when Capesize physical
spot earnings were at an all-time low. There has been a smaller increase in
the equivalent contract for the Panamax 4 TC average which has risen to near
$5,600/day.
SSY Consultancy & Research
15 April 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-