– Freight Market Report – Oktober 2015
ICMA – Freight Market Report
(15 October 2015)
Some Capesize Volatility But Freight Markets Largely
Subdued
Freight Market Overview
The last month saw another short-lived burst of volatility in the Capesize
market, with the average of the 5 TCs (180k dwt) jumping around $6,600/day
in just three trading days in late September to $15,295/day. The Capesize
average subsequently succumbed to downward pressure in early October and
had sunk to $10,191/day by 14 October. Over the same period the GladstoneJapan spot voyage rate jumped from $6.50/t to almost $8/t at the beginning of
October, before retreating to $6.60/t by time of writing.
Weak demand has most negatively impacted the Panamax market in the
Atlantic, where Round Voyage rates assessed by the Baltic Exchange
dwindled to below their Pacific equivalent and to less than $5,000/day for a
spell in early October (from more than $11,000/day in August). Some upward
momentum returned this week. With the Pacific Round Voyage rate ranging
between $6,000-6,7000/day, the Panamax 4 TC average has been subdued
during the past month as a consequence, hovering around the $6,000/day
mark.
Geared vessel earnings have been on a gradual downward trajectory.
Supramax average earnings (52k dwt vessels) slid below $7,000/day on 9
October for first time in four months, while the corresponding average for
Handysizes (28k dwt basis) was around $5,500/day on 14 October, marking a
monthly decrease of roughly $1,000/day.
Dry Bulk Trade Developments
Last month’s firming in Capesize rates was accompanied by increased iron
ore shipments. Exports from Brazil climbed to a year-to-date high of 35.6 Mt in
September, while last month’s record iron ore throughput at Port Hedland of
39.4 Mt indicates either a monthly all-time high or at the very least a robust
month for Australian iron ore exports in September. In the same month
Chinese imports attained a year-to-date high of 86.12 Mt.
Such strong trade data for iron ore contrasts with the picture for coal. US coal
exports, at 5.3 Mt in August, were down 1.2 Mt year-on-year and also marked
the 22nd successive month of annual decline. Meanwhile, Chinese imports in
January-September were down 67 Mt yr-on-yr. Such weak trade numbers
highlight the importance of grain stems to the Panamax market.
Combined exports of soya and corn from Brazil in September reached 8.3 Mt.
Although some 1.7 Mt higher than the volume shipped in the same month of
2014, this does represent an easing from the 11+ Mt/month pace seen in
-1-
May, June and July this year. The seasonal downturn in grain cargoes from
Brazil has contributed to downward pressure on Atlantic rates in both the
Panamax and Supramax sectors, which has not been alleviated by a counterseasonal build-up of port congestion at Brazil’s grain terminals. According to
local sources used by SSY, the number of Panamaxes with designated grain
cargoes (mainly corn and soyameal at present) waiting to load has risen to
more than 80, contrasting with a count of just eight at this point last year. US
Department of Agriculture data from end-September show the US grain export
season was yet to enter full swing at that point.
Steel products trade is on course for a record year, assisted by competitively
priced steel from China shipped overseas. As a consequence, the surfeit of
Chinese steel (PRC exports reached an all-time high of 11.3 Mt in last month)
has put local industries in importer markets under pressure, creating the
prospect of the first simultaneous expansion in annual world seaborne trade in
steel products and contraction in annual global crude steel production since
the 1990s.
Fleet Supply Developments
September proved to be the highest month for dry bulk carrier newbuilding
deliveries since January (traditionally a strong month for newbuildings). In the
first nine months of 2015 deliveries across the whole bulker fleet totalled 40.4
Mdwt, which is very close to the total for the same period of 2014, just 2.8%
higher. There are noticeable variations in the rates of growth across the bulker
sectors, however. The large number of new Ultramax designs (chiefly of
60,000-64,999 dwt) has swelled additions to the 40,000-64,999 dwt
Handymax fleet to 12.3 Mdwt, up a remarkable 45% on last year’s pace.
Deliveries of both Panamaxes and Capesizes on the other hand are running
behind the 2014 pace, by 23% and 9% in dwt terms, respectively.
With demolition activity in the 3q15 at its lowest quarterly level since 2010, net
fleet expansion in the 3q jumped to 9.9 Mdwt as a result. This represents the
fastest quarter of growth since the 1q14 and adds pressure to supply:demand
balances. That said, intense interest in scrapping in the 1h still means that
some 12.0 Mdwt of capacity has been removed from the dry bulk carrier fleet
in the first nine months of the year, which is almost double the volume
removed in the corresponding period last year.
Market Outlook – Freight Futures
Volatility in the Capesize physical markets has been accompanied by
movement in the freight futures (FFA) markets for nearby contracts. At close
of business on 14 October, the November contract for the average of the 4
Cape TCs (basis 172k dwt vessels) was trading at $12,650-12,800/day
against the current physical average of $9,071/day. There is a market
expectation that the first half of 2016 will bring a drop in rates, with the 1q16
priced around $6,200/day and the 2q16 close to $7,000/day.
-2-
In comparison, the FFA forward curve for the Panamax 4 TCs is flatter.
November was priced at $6,650/day, while the 1q16 was trading in a range
between $6,000-6,150/day.
SSY Consultancy & Research
15 October 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-
Nov-15
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
USD/t
$25
$20
$15
$10
$5
$0
May-10
Aug-10
Feb-12
May-12
Capesize Coal Spot Freight Rates
Nov-11
Gladstone-Japan
Aug-11
Newcastle-Qingdao
May-11
Newcastle-Zhoushan
Feb-11
Richards Bay-Qingdao
Nov-10
Aug-12
-4-
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Feb-15
May-15
Aug-15
Nov-15
Source: SSY
Nov-14
(15 October 2015)
Some Capesize Volatility But Freight Markets Largely
Subdued
Freight Market Overview
The last month saw another short-lived burst of volatility in the Capesize
market, with the average of the 5 TCs (180k dwt) jumping around $6,600/day
in just three trading days in late September to $15,295/day. The Capesize
average subsequently succumbed to downward pressure in early October and
had sunk to $10,191/day by 14 October. Over the same period the GladstoneJapan spot voyage rate jumped from $6.50/t to almost $8/t at the beginning of
October, before retreating to $6.60/t by time of writing.
Weak demand has most negatively impacted the Panamax market in the
Atlantic, where Round Voyage rates assessed by the Baltic Exchange
dwindled to below their Pacific equivalent and to less than $5,000/day for a
spell in early October (from more than $11,000/day in August). Some upward
momentum returned this week. With the Pacific Round Voyage rate ranging
between $6,000-6,7000/day, the Panamax 4 TC average has been subdued
during the past month as a consequence, hovering around the $6,000/day
mark.
Geared vessel earnings have been on a gradual downward trajectory.
Supramax average earnings (52k dwt vessels) slid below $7,000/day on 9
October for first time in four months, while the corresponding average for
Handysizes (28k dwt basis) was around $5,500/day on 14 October, marking a
monthly decrease of roughly $1,000/day.
Dry Bulk Trade Developments
Last month’s firming in Capesize rates was accompanied by increased iron
ore shipments. Exports from Brazil climbed to a year-to-date high of 35.6 Mt in
September, while last month’s record iron ore throughput at Port Hedland of
39.4 Mt indicates either a monthly all-time high or at the very least a robust
month for Australian iron ore exports in September. In the same month
Chinese imports attained a year-to-date high of 86.12 Mt.
Such strong trade data for iron ore contrasts with the picture for coal. US coal
exports, at 5.3 Mt in August, were down 1.2 Mt year-on-year and also marked
the 22nd successive month of annual decline. Meanwhile, Chinese imports in
January-September were down 67 Mt yr-on-yr. Such weak trade numbers
highlight the importance of grain stems to the Panamax market.
Combined exports of soya and corn from Brazil in September reached 8.3 Mt.
Although some 1.7 Mt higher than the volume shipped in the same month of
2014, this does represent an easing from the 11+ Mt/month pace seen in
-1-
May, June and July this year. The seasonal downturn in grain cargoes from
Brazil has contributed to downward pressure on Atlantic rates in both the
Panamax and Supramax sectors, which has not been alleviated by a counterseasonal build-up of port congestion at Brazil’s grain terminals. According to
local sources used by SSY, the number of Panamaxes with designated grain
cargoes (mainly corn and soyameal at present) waiting to load has risen to
more than 80, contrasting with a count of just eight at this point last year. US
Department of Agriculture data from end-September show the US grain export
season was yet to enter full swing at that point.
Steel products trade is on course for a record year, assisted by competitively
priced steel from China shipped overseas. As a consequence, the surfeit of
Chinese steel (PRC exports reached an all-time high of 11.3 Mt in last month)
has put local industries in importer markets under pressure, creating the
prospect of the first simultaneous expansion in annual world seaborne trade in
steel products and contraction in annual global crude steel production since
the 1990s.
Fleet Supply Developments
September proved to be the highest month for dry bulk carrier newbuilding
deliveries since January (traditionally a strong month for newbuildings). In the
first nine months of 2015 deliveries across the whole bulker fleet totalled 40.4
Mdwt, which is very close to the total for the same period of 2014, just 2.8%
higher. There are noticeable variations in the rates of growth across the bulker
sectors, however. The large number of new Ultramax designs (chiefly of
60,000-64,999 dwt) has swelled additions to the 40,000-64,999 dwt
Handymax fleet to 12.3 Mdwt, up a remarkable 45% on last year’s pace.
Deliveries of both Panamaxes and Capesizes on the other hand are running
behind the 2014 pace, by 23% and 9% in dwt terms, respectively.
With demolition activity in the 3q15 at its lowest quarterly level since 2010, net
fleet expansion in the 3q jumped to 9.9 Mdwt as a result. This represents the
fastest quarter of growth since the 1q14 and adds pressure to supply:demand
balances. That said, intense interest in scrapping in the 1h still means that
some 12.0 Mdwt of capacity has been removed from the dry bulk carrier fleet
in the first nine months of the year, which is almost double the volume
removed in the corresponding period last year.
Market Outlook – Freight Futures
Volatility in the Capesize physical markets has been accompanied by
movement in the freight futures (FFA) markets for nearby contracts. At close
of business on 14 October, the November contract for the average of the 4
Cape TCs (basis 172k dwt vessels) was trading at $12,650-12,800/day
against the current physical average of $9,071/day. There is a market
expectation that the first half of 2016 will bring a drop in rates, with the 1q16
priced around $6,200/day and the 2q16 close to $7,000/day.
-2-
In comparison, the FFA forward curve for the Panamax 4 TCs is flatter.
November was priced at $6,650/day, while the 1q16 was trading in a range
between $6,000-6,150/day.
SSY Consultancy & Research
15 October 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-
Nov-15
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
USD/t
$25
$20
$15
$10
$5
$0
May-10
Aug-10
Feb-12
May-12
Capesize Coal Spot Freight Rates
Nov-11
Gladstone-Japan
Aug-11
Newcastle-Qingdao
May-11
Newcastle-Zhoushan
Feb-11
Richards Bay-Qingdao
Nov-10
Aug-12
-4-
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Feb-15
May-15
Aug-15
Nov-15
Source: SSY
Nov-14