Baltic Sea Freight Index Fell Another 9.6% This Week as the Capesize index plunged 19.8%

The Baltic Exchange’s dry bulk sea freight index slid another 9.6% this week. Iron ore prices did edge higher after a record 10-session slide, however fell for the week with the Singapore benchmark down on renewed concerns over demand in China with fresh COVID-19 alerts and shut-ins. The BDI pressure came again from falling rates across smaller vessel segments. The capesize index plunged 19.8% this week, its worst drop since May 27. The panamax index was down 5.8% for the week.

Capesize Vessel

Baltic Exchange Dry Index (BDI) Segments June 24, 2022)

  • The Baltic Exchange’s dry bulk sea freight index fell on Friday 23 points, or about 1%, to 2,331 pressured by a drop in rates across vessel segments. The overall index, which factors in rates for capesize, panamax and supramax vessels was down 9.6% for the week.
  • The capesize index lost 23 points, or 1%, to 2,396. The index shed nearly 19.8% this week, its worst drop since May 27.
  • Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $186 to $19,875.
  • The panamax index fell 37 points, or 1.4%, to 2,695 points, notching a weekly decline of 5.8%. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000-70,000 tonnes, decreased by $338 to $24,254.
  • The supramax index for smaller vessels shed 17 points to 2,449.
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 eleven 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.
  • “Negative pressure is still present in some of the main routes, indicating a relatively more volatile market in the near term,” Allied Shipbroking said in a weekly note referring to the capesize segment.
  • Dalian iron ore futures edged higher after a record 10-session slide with prices offered in Singapore pressured by a gloomy outlook for demand from top steel producer China. There are renewed concerns over demand in China, where fresh COVID-19 alerts threaten to derail the economy’s reopening and steel margins have come under pressure.

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