Baltic Sea Freight Index Falls to Five Month Low Down 15.4% for July.

The Baltic Exchange’s dry bulk sea freight index booked its worst month since January on Friday with rates across component vessel segments down double digits for the month. The BDI factors in rates for capesize, panamax and supramax shipping vessels, fell 50 points Friday, or 2.6%, to 1,895 points, its lowest in over five months. The capesize index, which had been the relative bright spot by outweighing falls in other vessel segments, lost 109 points, or nearly 5%, to a fresh three-week low of 2,081 points having its worst month since January, sliding 22.8% for the week.

Capesize Vessel

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

  • The Baltic Exchange’s dry bulk sea freight index fell Friday 50 points, or 2.6%, to 1,895 points, its lowest in over five months. The overall index, which factors in rates for capesize, panamax and supramax vessels dropped for the third straight month, down 15.4% for July.
  • The capesize index lost 109 points, or nearly 5%, to a fresh three-week low of 2,081 points. It had its worst month since January, while sliding 22.8% for the week.
  • Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down by $907 at $17,255.
  • Capesize sector strength had been driven mainly by iron ore exports from Brazil, underpinning the Baltic index. However, iron ore futures retreated as China indicated controlling COVID-19 outbreaks was still a priority, although it stayed on track for its steepest weekly rise since March.
  • The panamax index was down 14 points, or 0.7%, at a one-week low of 2,051 points. It was down 17.5% on the month, its fourth consecutive monthly decline.
  • Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased by $118 to $18,463.
  • The supramax index fell by 32 points to 1,971 points, falling 14.5% on the month registering its tenth consecutive weekly decline.
BDI June 10, 2022

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.
  • Shipbroker Jefferies, however, expects average rates for 2022 to be higher than last year rates “especially as most Western buyers of commodities try to diversify away from Russian cargoes”.
  • Shanghai remains largely shuttered for sixteen consecutive weeks. Air cargo operations remain severely constrained at PVG.  Ramp handlers, truckers, and key employees have seen limited access to airport and cargo facilities. As a result, most major airlines and air cargo carriers have canceled flights in and out of PVG.
  • With few logical geographic alternatives to PVG, cargo backlogs continue to mount. When combined with new production volumes as the city itself reopens, we estimate that backlogs could take weeks to clear, driving significant capacity tightness on PVG-based lanes, and thus materially increasing prices.
  • Ukrainian President Volodymyr Zelenskiy said his country is ready to start grain shipments and is awaiting a signal from the United Nations and Turkey to start the shipments.
  • Lloyd’s of London insurer Ascot and broker Marsh launched marine cargo and war insurance for grain and food products moving from Ukrainian Black Sea ports.

Port Delays

  • Delays at ports along the U.S. West Coast remain
  • Ports have tried to extend working times to clear backlogs and companies have sought to shorten delivery routes and diversify goods suppliers to alleviate delays.
  • 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); Baltic Exchange Panamax Index (BPI);  the Baltic Exchange Supramax Index (BSI); and the Baltic Exchange Handysize index (BHSI). The 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.

Source: The Baltic Exchange Reuters

From The TradersCommunity US Research Desk