Baltic Dry Index Higher First Time in Five Weeks Led by Capesize Surging 15%

Baltic Exchange’s dry bulk sea freight index booked its first weekly gain in five.  The catalyst again came from the capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, surging 15%. The Panamax market sell-off continued in a similar vein to the previous week down another 3.7%, with all sector indices continuing to lose ground. Coming closer to the Christmas period owners will be very aware of the potential seasonal low period that looms in Q1. Last week Maersk, the largest container shipping company warned freight rates have peaked driven by both decreasing demand and easing of supply chain congestion.

Capesize Iron ore loading

Baltic Exchange Dry Index (BDI) Segments (November 11, 2022)

  • The Baltic Exchange’s dry bulk sea freight index on Friday fell about 2.5% to 1,355 points but booked its first weekly gain in five. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, for the week, the Baltic Dry index gained 2.4%.
  • The capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, dropped 6.5% to 1,544 points from Thursday’s two-week high; for the week a 15% jump in the capesize index
  • The Panamax index, which tracks about 60,000 to 70,000 tonnes of coal and grains cargoes, rose 1.1%, to 1,637 points, snapping a four-session losing streak, for the week, a 3.7% fall in the panamax index.
  • The supramax index fell for a 15th straight session to 1,213 points, the lowest level since February 2021.
BDI November 11, 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

  • The Biden administration announced 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”
  • 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.
  • India’s thermal coal imports from Russia were expected fell for the first time in four months in September, potentially resulting in lower revenues for Moscow at a time it is mobilizing more troops to fight in Ukraine.
  • Iron ore prices popped after reports the world’s largest steel producer, China would reopen its economy. Last week iron ore prices hit its lowest price since May 2020, having fallen more than 50 per cent from their peak in March.
  • Steel rebar futures fell to the lowest in two-years. Deepening recession fears and heavy losses in Chinese bonds and stocks following the reelection of President Xi.
  • India restricted rice exports after shipments jumped sharply in the past few months and amid concerns over the new season crop because of below-average rainfall in four key producing states, a top government official said.
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*
  • 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.

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