Baltic Dry Bulk Sea Freight Index Closes Down 31.7% for the Year, Most Since 2015

The Baltic Exchange’s dry bulk sea freight index fell 8.2% on Friday to close out a turbulent year for shipping. It was the second day of losses to an over one-week low of 1,515 points. The BDI plunged 13.9% this quarter and 31.7% for the year, the most since 2015. Concerns about the impact of fresh covid-19 outbreaks in China on demand hamper shipping. Iron ore has rallied to five-month highs recently so there is some hope in the new year. Christmas period owners will be very aware of the potential seasonal low period that looms in Q1.

Capesize Iron ore loading

The Baltic Exchange will not publish data for the main index from December 26th until January 2nd, 2023.

Baltic Exchange Dry Index (BDI) Segments (December 30, 2022)

  • The Baltic Exchange’s dry bulk sea freight index fell 8.2% on Friday to close out a turbulent year for shipping. It was the second day of losses to an over one-week low of 1,515 points.
  • The overall index, which factors in rates for capesize, panamax and supramax shipping vessels carrying dry bulk commodities. The BDI plunged 13.9% this quarter and 31.7% for the year, the most since 2015,
  • The capesize index which tracks iron ore and coal cargos of 150,000 tonnes, tumbled 13.9% to mark its worst day since late August at 2,261 points on Friday.
  • The panamax index which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased fell 1.8% to 1,535 points Friday
  • The supramax index lost another 21 points to 1,062 points Friday
BDI December 30, 2022

Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on Wednesday the 10th of February 2016, when the index dropped to 290 points.

Factors influencing Freight right now

  • Prices for the most actively traded iron ore futures on the Dalian Commodity Exchange for iron ore cargoes with a 63.5% iron ore content for delivery into Tianjin had a third straight weekly rise on Friday on optimism over China’s economic recovery prospects in 2023, with traders largely brushing aside a wave of local COVID-19 infections.
  • “The unrelenting decline in container freight rates from Asia, caused by a collapse in demand, is compelling ocean carriers to blank more sailings than ever before as vessel utilization hits new lows,” said Joe Monaghan, CEO of Worldwide Logistics Group.
  • HLS analysts predict further 2.5% decline in container volumes and a nearly 5-6% increase in capacity in 2023, which will continue to negatively impact freight rates in 2023.
  • U.S. West Coast ports take biggest hit as spot rate for a container from Asia to the U.S. West Coast has crossed the breakeven point
  • HLS expects most carriers to extend their West Coast rates until December 14, holding at $1,300-$1,400 per forty-foot equivalent containers (FEU). U.S. East Coast rates are expected to drop by $200 or $300 to average $3,200-3,300 per FEU in the first half of December.
  • The Biden administration sweeping export restrictions against Russia, hammering its access to global exports following Moscow’s attack on Ukraine.
  • Maersk, largest container shipping company after earnings; “It is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply chain congestion”
  • The 2M Alliance of Maersk and MSC has suspended almost half of its U.S. West Coast services for December.
  • The Ocean Alliance (CMA CGM, Cosco Shipping, OOCL and Evergreen) and THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Line) have cut overall vessel capacity by 40-50% up to Chinese New Year.
  • Port of New York and New Jersey is the top among all U.S. ports for a fourth-consecutive month based on November data.
  • West Coast ports of Los Angeles and Long Beach experienced the largest drop in trade, according to Josh Brazil, vice president of supply chain insights at Project44, as shippers also rerouted some of their shipments to the East Coast to avoid the risk of a major union strike at West Coast ports.
  • Vessel TEU (twenty-foot equivalent unit) volume from China to the U.S. has significantly pulled back since the end of summer 2022, including a decline of 21% in total vessel container volume between August and November – Supply chain research firm Project44 
Dry Bulk Rotes Source: SEC

Port Delays

CNBC Supply Chain Heat Map Oct 28, 2022*
  • Port of New York and New Jersey is the top among all U.S. ports for a second-consecutive month based on September data.
  • One reason for the East Coast port gains is fears of West Coast labor strikes. This week, port worker union reps and Pacific Coast port ownership are meeting for negotiations.
  • Fears of a nationwide rail strike have escalated again, and 322 state, local, and federal trade associations sent a joint letter to President Biden on Friday about their concerns.
  • That diversion of containers to Long Beach, in addition to the continued re-routing of containers to the East Coast, led to the Port of New York to take the No. 1 spot in processing import and export containers in August. Port of Los Angeles fell to third.
  • The CNBC Supply Chain Heat Map for the United States shows New York has 11 vessels waiting with an average wait time of 2.8 days. Savannah has the most vessels with 29 and a wait of over 10 days. In the Gulf, Houston has 11 vessels waiting for almost five days.
CNBC Supply Chain Heat Map Sep 7, 2022*
  • This year, the U.S. has imported more goods from Europe than China, a big shift from the 2010s, according to Project 44.
  • Germany’s exports to the U.S. were almost 50% higher in September year over year. Germany’s mechanical engineering sector has boosted its exports to the U.S. by almost 20% in a year over year comparison of the first nine months of 2022, according to Project 44.
  • The U.S. is the top trade partner, representing 30% of Port of Liverpool volume.
  • Approximately $1 billion in trade is moved weekly at the Port of Liverpool.
  • Diageo, Caterpillar, Donaldson, and Xerox are just some companies who use Liverpool port.
  • “The economic and political climate in the U.K. is volatile and this sustained disruption will start to cause sustained problems at a time when imports are becoming very expensive due to the weak pound and some U.S. exporters will be starting to price risk back into their contracts.”
  • Leading container group A.P. Moller-Maersk told its customers last quarter it was struggling to move goods around the world.
CNBC Supply Chain Heat Map Dec 4, 2022
  • U.S. manufacturing orders in China are down 40% in what a logistics manager described to CNBC as an unrelenting demand collapse.
  • Asia-based shipping firm HLS recently told clients it is a “very bad time for the shipping industry.”
  • Worldwide Logistics expecting Chinese factories to shut down two weeks earlier than usual for Chinese Lunar New Year, Chinese New Year’s Eve falls on Jan. 21 next year.

The Baltic Dry Index (BDI) is a composite of the dry bulk timecharter averages and provides a continuous time series since 1985. The BDI is a composite of and factors in rates for Capesize, Panamax and Supramax Timecharter Averages. It is reported around the world as a proxy for dry bulk shipping stocks as well as a general shipping market bellwether.

  • Baltic Capesize Index (40%)
  • Baltic Panamax Index (30%) 
  • Baltic Supramax Index (30%) 

There a number of negative catalysts stemming from the climate and supply crisis stifling demand. While we are seeing easing congestion at Chinese ports and thin coal cargo flows out of the Pacific are weighing on capesizes. Steel futures prices in China jumped, with hot-rolled coils and construction rebar climbing more than 4% in intraday trade to narrow the gap with spot prices, as traders cheered a marginal improvement in consumption of industrial metals.

With China striving to ease it’s energy crisis by limiting steel production to limit industrial power usage portside inventory of iron ore has swollen to the highest level in 31 months. China is the world’s top steel producer and their restrictions have crushed demand. for iron ore.

What are the Baltic indices?

From The Baltic Exchange

The Baltic indices are based on assessments of the cost of transporting various bulk cargoes, both wet (eg crude oil and oil products),dry (eg coal and iron ore), gas (LNG and LPG) made by leading shipbroking houses located around the world on a per tonne and daily hire basis. The information is collated and published by the Baltic Exchange. We also provide daily container market assessments in collaboration with Freightos and a weekly air freight index as well as assessments on vessel operating costs, Sale & Purchase and vessel recycling prices. 

The principal dry cargo indices are:

  • The Baltic Exchange Capesize Index (BCI); The Brazil-China iron ore route is often considered the key driver of rates for Capesize vessels, which are commonly employed on the route.
  • Baltic Exchange Panamax Index (BPI)
  • Baltic Exchange Supramax Index (BSI)
  • Baltic Exchange Handysize index (BHSI).
  • Baltic Exchange Dry Index (BDI) is calculated by taking the timecharter components of the Baltic’s capesize, panamax and supramax indices. 

The Baltic Exchange International Tanker Routes (BITR) reports on international oil routes and makes up the Baltic Exchange Dirty Tanker Index (BDTI) and the Baltic Exchange Clean Tanker Index (BCTI). 

We cover the gas markets through our LNG (BLNG) and LPG (BLPG) assessments. 

Shipping investors are able to assess the health of vessel earnings through our quarterly operating expenses assessments, as well as our weekly Sale & Purchase and Recycling assessments. 
Forward curves for all listed freight contracts are also published on a daily basis.

*The CNBC Supply Chain Heat Map data providers are artificial intelligence and predictive analytics company Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight rate benchmarking and market analytics platform Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet, provider of global, daily satellite imagery and geospatial solutions.

Source: The Baltic Exchange CNBC

From The TradersCommunity US Research Desk