Capesize Shipping Index Rose 78% for the Week on China Infrastructure Hopes

The Baltic Exchange’s dry bulk sea freight index on Friday had its best session in nearly six months. The move saw the BDI record a weekly gain of 0.4%, the first positive move after six consecutive weekly declines, bouncing off lows last seen in June 2020. Volatility is supreme, the capesize index after a 46% weekly fall, its worst in over two years last week reversed with a 78% weekly gain, its best since June 19, 2020, also reversing a six-week losing streak.

Capesize Vessel

Baltic Exchange Dry Index (BDI) Segments (September 2, 2022)

  • The Baltic Exchange’s dry bulk sea freight index on Friday was up 84 points, or 8.38%, at 1,086 points.
  • The overall index, which factors in rates for capesize, panamax and supramax vessels recorded a weekly gain of 0.4%, reversing six weekly consecutive losses.
  • The capesize index gained for the second consecutive day Friday, rising 264 points, or about 56.3 %, to 733 points. It posted a 78% weekly gain, its best since June 19, 2020, breaking a six-week losing streak.
  • Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as coal and steel making ingredient iron-ore used in construction, rose by $2,189 to $6,076.
  • The panamax index was up 41 points, or 3.3%, at 1,271 points, on its best day in over a month. It posted a 7.4% weekly fall, its sixth consecutive weekly dip.
  • Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, gained $373 to $11,442.
  • The supramax index fell for the sixth consecutive session, losing 45 points to 1,514 points.
BDI September 2, 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.
  • 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.
  • BIMCO’s Chief Shipping Analyst Niels Rasmussen said in a note. “We remain positive that demand from infrastructure projects should improve in the coming months, supported by China’s policies. However, China’s real estate crisis will remain an obstacle to iron ore and steel demand,”
  • A recovery would be a boon for especially Capesizes that have recently suffered due to increased supply following a reduction in congestion, Rasmussen added.
  • China will take more steps to support the economy, including increasing funding support for infrastructure projects among others, state media quoted the cabinet as saying last week.

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%) 

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.

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