– Freight Market Report – Februari 2016
Coal Asia – Freight Market Report
(23 February 2016)
Freight Market Continues to Fall
Freight Market Overview
The slump in the dry bulk market has continued with the Baltic Exchange Dry
Index falling further to a new all-time low of 290 points by 10 February. The
current index level of 291 compares with a year-ago value of 540.
Average Capesize (180k dwt) earnings, traditionally weaker in the 1q,
slumped to $2,662/day on 19 January and are now just under $2,700/day.
This decline is reflected in the Gladstone-Japan Capesize coal rate which has
fallen from $4.05/t in late December to $3.15/t at the end of last week.
Similarly, the Capesize one-year period rate has slumped to $5,300/day
compared with $7,000/day at the end of December 2015.
The Panamax 4 TC average (for 74k dwt vessels) fell to a new low of
$2,260/day on 1 February before a slight upturn in Pacific rates caused a
small gain to $2,597/day. The Newcastle-Qingdao Panamax coal spot rate fell
from $5.65/t in late December to $4.45/t at the end of January, but has since
climbed to $5.35/t.
Average earnings for geared vessels have followed the lead of their larger
counterparts, falling sharply through January with the pace of decline slowing
in early February to the current levels of $2,544/day for 52k dwt Supramax
and $2,703/day for 28k dwt Handysize vessels.
Dry Bulk Trade Developments
Iron ore trade volumes traditionally weaken from the 4q at the start of the year
and January data showed falling shipments from both Brazil and Australia. In
January iron ore exports from Port Hedland dropped to a 19-month low of
33.8 Mt, down 3.0 Mt year-on-year, while Brazilian iron ore exports fell to the
lowest level in 12 months at 25.0 Mt. In both cases this represented a
significant slowdown from the 4q15.
Global crude steel output fell on an annual basis in every month of 2015, with
the pace of decline accelerating as the year progressed to leave output for the
full year down 2.9% on 2014 at 1,600 Mt. This is the first annual decline in
global steel output since 2009, according to the World Steel Association. A
2.3% decrease in Chinese steel output for the full year, to 803.8 Mt, was the
single largest contributor to the decline in global production despite the strong
pace of steel exports that benefitted geared vessel demand. Of the major
steel producing centres, only India saw positive growth in 2015, as output
increased by 2.6% to 89.6 Mt, although even this marked the slowest since
2001.
-1-
Full-year coal export data from the US provided further evidence of the slump
in the global coal trade that has contributed to the extremely weak Panamax
market. US coal exports (excl. cargoes to Canada) dropped sharply to a sixyear low of 61.6 Mt in 2015, down 20.5 Mt year-on-year, according to official
data, with coking coal exports plunging to 37.9 Mt, down 15.4 Mt, as
shipments to Europe fell by over a third to 21.1 Mt.
Similarly, Canadian coking coal exports (excl.US shipments) fell to a four-year
low of 26.9 Mt in 2015 as shipments to Japan, China and South Korea all
declined, cutting trans-Pacific trade.
However, depressed freight rates have provided opportunities for exports to
non-traditional markets, such as reported interest in Colombian coal into India
for the first time in two years.
Brazil’s corn exports, although down from December’s all-time high of 6.3 Mt,
were still up 1.3 Mt year-on-year in January at 4.5 Mt. However, the ongoing
weakness of the coal trade has meant that, despite this continuing strong
push from Brazil coinciding with the main US grain export season, there has
been no observable boost to earnings. In recognition of the strong pace of
Latin American exports and the expectations of strong crops in 2015/16 the
US Department of Agriculture has again raised its forecasts for Argentine and
Brazilian corn exports in the 2015/16 market year (Oct-Sep) to 19.5 Mt and a
record 36.5 Mt, respectively. This has been accompanied by a further
downgrade in forecast US corn exports to a four-year low of 42.0 Mt as US
shipments struggle to compete with lower cost South American suppliers.
Fleet Supply Developments
January saw the strongest month for bulk carrier newbuilding deliveries in
three years with 105 vessels (8.6 Mdwt) delivered, according to SSY data.
This was higher than the combined total for the final three months of 2015.
Against such a bleak backdrop for shipowners, interest in demolition and
vessel lay-up has naturally heightened. Amid frequent reports of intended layups, however, actual instances of full lay-up are limited at present.
The rapid pace of deletions seen in December continued at the start of 2016
with 50 vessels (3.6 Mdwt) scrapped in January, including a monthly record of
19 Panamaxes (1.4 Mdwt). With a further 48 dry bulk vessels (3.9 Mdwt) due
for scrap, including an additional 20 Panamaxes (1.5 Mdwt), the trend for
strong demolition numbers looks likely to continue.
In spite of these deletions from the fleet, January still saw the highest net
growth in the dry bulk fleet since January last year at 5.0 Mdwt.
Market Outlook – Freight Futures
The freight futures (FFA) market has continued to fall alongside the physical
freight market with the Feb-Dec16 contract price for the Capesize (172k dwt)
-2-
4 TC average at $5,150/day/day at close of business on 12 February. This
compares with a calendar year 2016 price of $6,050/day at the start of
January. This decline has been matched by the Panamax 4 TC average with
the Feb-Dec16 contract trading at $4,675/day, as opposed to $5,188/day at
the beginning of the year.
SSY Consultancy & Research
15 February 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-
(23 February 2016)
Freight Market Continues to Fall
Freight Market Overview
The slump in the dry bulk market has continued with the Baltic Exchange Dry
Index falling further to a new all-time low of 290 points by 10 February. The
current index level of 291 compares with a year-ago value of 540.
Average Capesize (180k dwt) earnings, traditionally weaker in the 1q,
slumped to $2,662/day on 19 January and are now just under $2,700/day.
This decline is reflected in the Gladstone-Japan Capesize coal rate which has
fallen from $4.05/t in late December to $3.15/t at the end of last week.
Similarly, the Capesize one-year period rate has slumped to $5,300/day
compared with $7,000/day at the end of December 2015.
The Panamax 4 TC average (for 74k dwt vessels) fell to a new low of
$2,260/day on 1 February before a slight upturn in Pacific rates caused a
small gain to $2,597/day. The Newcastle-Qingdao Panamax coal spot rate fell
from $5.65/t in late December to $4.45/t at the end of January, but has since
climbed to $5.35/t.
Average earnings for geared vessels have followed the lead of their larger
counterparts, falling sharply through January with the pace of decline slowing
in early February to the current levels of $2,544/day for 52k dwt Supramax
and $2,703/day for 28k dwt Handysize vessels.
Dry Bulk Trade Developments
Iron ore trade volumes traditionally weaken from the 4q at the start of the year
and January data showed falling shipments from both Brazil and Australia. In
January iron ore exports from Port Hedland dropped to a 19-month low of
33.8 Mt, down 3.0 Mt year-on-year, while Brazilian iron ore exports fell to the
lowest level in 12 months at 25.0 Mt. In both cases this represented a
significant slowdown from the 4q15.
Global crude steel output fell on an annual basis in every month of 2015, with
the pace of decline accelerating as the year progressed to leave output for the
full year down 2.9% on 2014 at 1,600 Mt. This is the first annual decline in
global steel output since 2009, according to the World Steel Association. A
2.3% decrease in Chinese steel output for the full year, to 803.8 Mt, was the
single largest contributor to the decline in global production despite the strong
pace of steel exports that benefitted geared vessel demand. Of the major
steel producing centres, only India saw positive growth in 2015, as output
increased by 2.6% to 89.6 Mt, although even this marked the slowest since
2001.
-1-
Full-year coal export data from the US provided further evidence of the slump
in the global coal trade that has contributed to the extremely weak Panamax
market. US coal exports (excl. cargoes to Canada) dropped sharply to a sixyear low of 61.6 Mt in 2015, down 20.5 Mt year-on-year, according to official
data, with coking coal exports plunging to 37.9 Mt, down 15.4 Mt, as
shipments to Europe fell by over a third to 21.1 Mt.
Similarly, Canadian coking coal exports (excl.US shipments) fell to a four-year
low of 26.9 Mt in 2015 as shipments to Japan, China and South Korea all
declined, cutting trans-Pacific trade.
However, depressed freight rates have provided opportunities for exports to
non-traditional markets, such as reported interest in Colombian coal into India
for the first time in two years.
Brazil’s corn exports, although down from December’s all-time high of 6.3 Mt,
were still up 1.3 Mt year-on-year in January at 4.5 Mt. However, the ongoing
weakness of the coal trade has meant that, despite this continuing strong
push from Brazil coinciding with the main US grain export season, there has
been no observable boost to earnings. In recognition of the strong pace of
Latin American exports and the expectations of strong crops in 2015/16 the
US Department of Agriculture has again raised its forecasts for Argentine and
Brazilian corn exports in the 2015/16 market year (Oct-Sep) to 19.5 Mt and a
record 36.5 Mt, respectively. This has been accompanied by a further
downgrade in forecast US corn exports to a four-year low of 42.0 Mt as US
shipments struggle to compete with lower cost South American suppliers.
Fleet Supply Developments
January saw the strongest month for bulk carrier newbuilding deliveries in
three years with 105 vessels (8.6 Mdwt) delivered, according to SSY data.
This was higher than the combined total for the final three months of 2015.
Against such a bleak backdrop for shipowners, interest in demolition and
vessel lay-up has naturally heightened. Amid frequent reports of intended layups, however, actual instances of full lay-up are limited at present.
The rapid pace of deletions seen in December continued at the start of 2016
with 50 vessels (3.6 Mdwt) scrapped in January, including a monthly record of
19 Panamaxes (1.4 Mdwt). With a further 48 dry bulk vessels (3.9 Mdwt) due
for scrap, including an additional 20 Panamaxes (1.5 Mdwt), the trend for
strong demolition numbers looks likely to continue.
In spite of these deletions from the fleet, January still saw the highest net
growth in the dry bulk fleet since January last year at 5.0 Mdwt.
Market Outlook – Freight Futures
The freight futures (FFA) market has continued to fall alongside the physical
freight market with the Feb-Dec16 contract price for the Capesize (172k dwt)
-2-
4 TC average at $5,150/day/day at close of business on 12 February. This
compares with a calendar year 2016 price of $6,050/day at the start of
January. This decline has been matched by the Panamax 4 TC average with
the Feb-Dec16 contract trading at $4,675/day, as opposed to $5,188/day at
the beginning of the year.
SSY Consultancy & Research
15 February 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-