The Baltic Exchange’s dry bulk sea freight index booked its worst week in over two months, taking it to a six-month low on Friday. Rates across component vessel segments were down hard. China’s woes deepen with the Chinese ailing property sector, COVID-19 curbs, steel production cuts and tensions over Taiwan, which were heighten by US speaker’s visit there and China sending missiles into Japanese waters. The BDI index saw a weekly loss of nearly 18%. The BDI factors in rates for capesize, panamax and supramax shipping vessels, fell 43 points to 1,560, its lowest since Feb. 8.
Baltic Exchange Dry Index (BDI) Segments (August 5, 2022)
- The Baltic Exchange’s dry bulk sea freight index on Friday fell 43 points to 1,560, its lowest since Feb. 8. The overall index, which factors in rates for capesize, panamax and supramax vessels dropped to a near six-month low on Friday with its worst week in more than two months.
- The capesize index lost 69 points, or 4.7%, to 1,411 points, its lowest since April 20. It shed nearly a third of its value this week.
- Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, fell $571 on the day to $11,700.
- Capesize sector strength had been driven mainly by iron ore exports from Brazil, underpinning the Baltic index. However, Iron ore futures trended lower this week amid worries about China’s ailing property sector, COVID-19 curbs, steel production cuts and tensions over Taiwan.
- The panamax index lost 16 points, or 0.8%, to 1,967 points, its lowest since July 19. It lost 4.1% this week.
- Average earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased by $150 to $17,699.
- The supramax index fell by 47 points to 1,700 points, its lowest since Feb. 7.
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 seventeen 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.
- Neils Rasmussen, chief shipping analyst at BIMCO on a deal to unblock Ukraine’s grain exports from the Black Sea.,”This corridor has been established to allow exports of Ukrainian grain … but the agreement so far is only for 120 days so who knows whether it’s going to be extended?”
- The implementation of an EU ban on Russian coal could also prompt the bloc to look elsewhere for imports, Rasmussen added.
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