Shipping Vessel Demand Switch, Panamax rose 18% while Capesize Fell 12.4% – TC Shipping Monitor

The Baltic Dry Index (BDI) fell 0.6% for the week with strong demand in the panamax vessel segment continuing, which rose 18% for the period, the highest level since May 15. The move came from coal and grain cargoes. Meanwhile Singapore iron ore futures helped by rising steel mill production in China rose, but lingering property sector and steel demand concerns weigh. The uncertainty there helped the capesize index fall 12.4% for the week.

Capesize loading Iron Ore

Global shipping has been swirling around since Russia’s invasion of Ukraine, right on the heels of Covid afflicted shipping channels since 2020. Since then, it has been trying to find it’s feet and the latest setback was the COVID shutdown in China and reopening.

Baltic Exchange Dry Index (BDI) Segments (August 11, 2023)

  • The Baltic Exchange’s dry bulk sea freight index fell on Friday 8 points to 1,129.
  • The overall index, which factors in rates for capesize, panamax and supramax shipping vessels carrying dry bulk commodities fell 0.6% for the week after two weeks of gains.
  • The capesize 5TC index which tracks iron ore and coal cargos of 150,000 tonnes, declined 82 points, or about 5%, to 1,592 Friday. For the week fell 12.4%.
  • Average daily earnings for capesizes decreased $683 to $13,200.
  • The Panamax 5TC basket of spot-rate averages across five key routes which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes gained 45 points, or 3.5%, to 1,337 on Friday. It was the highest level since May 15, the best week in more than five months. The index rising 18% for the week.
  • Average daily earnings for panamaxes increased $408 to $12,037.
  • Among smaller vessels, the supramax index rose 60 points for the week, increased by 22 points, or 3.1% to 728.
BDI Aug 4, 2023

We saw seen a pattern of sharp bounces and declines in the BDI all year. Ocean freight rates came were under pressure to start 2023, with the Baltic Dry Index (BDI) dipping to its lowest level in near three years as poor demand for vessels weighed on values. Since London’s Baltic Exchange began publishing the BDI in 1985 (originally the Baltic Freight Index), it had only been lower during two other periods: in the first half of 2020, at the height of pandemic lockdowns, and in the first half of 2016, during an extreme downturn for the dry bulk sector.

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.

Drewry’s World Container Index (WCI)

Global container freight rates show a fourth weekly rise, albeit at a much-reduced pace than the 12% jump in the previous week. The Drewry composite index is up 1.7% at $1791 pr 40ft box with small rises on the China to US and EU route. @Ole_S_Hansen Aug 10, 2023

Factors influencing Freight right now.

Tanker Market

The tanker market drifted lower in July, with Aframax and Suezmax spot freight rates approaching the lowest levels seen so far this year amid slowing of activities in the Atlantic basin for these vessels.

  • Aframax spot freight rates on the Mediterranean-to-Northwest Europe route declined 22%, while Suezmax rates on the US Gulf Coast-to-Europe route fell 11%.
  • VLCC rates experienced less of a decline as a pick-up in long-haul demand out of the Atlantic basin offset reduced activities out of the Middle East.
  • Spot freight rates on the Middle East-to-East route declined 15% m-o-m. However, freight rates overall remain at elevated levels amid trade shifts supporting tonne-mile growth.
  • Clean rates were mixed, with activities in the Atlantic basin supporting the West of Suez routes, while the return of Asian refineries from maintenance weighed on East of Suez flows. Clean freight rates on the intra-Med route rose 23% m-o-m, while rates on the Middle East-to-East route declined 15%

Via OPEC August MOMR

China Plan to Cap Steel output at 2022 level

Dalian iron ore futures dipped on Friday, but Singapore iron ore futures recovered as traders hopes for a more substantial aid for China’s property sector countered fears of slowing steel output.

We had seen a rebound in early June with Iron ore futures up for a third consecutive weekly gain, driven by optimism about demand as signs emerged that top steel producer China is moving to support its faltering economy.

China is set to release a plan capping domestic steelmakers’ output at 2022 levels. The strategy may help steel prices by reducing oversupply but could put pressure on mills that are already suffering from low profits. The planned cap is open to review in the second half of the year depending on market conditions, Bloomberg reported.

Capesize Iron ore loading

China’s National Development and Reform Commission did not immediately respond to a request for comment. While the government may not require steel mills to reduce production by a certain percentage this year, a target on per-ton emissions will remain in place, Bloomberg said, citing people familiar with the matter.

China plans to cut steel output, but it may not impact country’s iron ore demand, Clarksons Securities says

Bloomberg Trade Tracker

Eight of 10 indicators on the Bloomberg Trade Tracker in negative territory as of Feb. 17, a very slight improvement from nine at the start of the year. Ports are seeing fewer delays and higher throughput, pointing to a letup in the supply chain stress that’s hindered world trade since 2020. – Bloomberg

1. China’s Covid Impact

CNBC Supply Chain Heat Map Dec 4, 2022

Key Chinese Ports

  • The Port of Shanghai is the world’s number one container port.
  • The Port of Shenzhen is the fourth-largest container port in the world and the city that is home to Apple manufacturers.
  • Qingdao is the sixth-largest port in the world, is reported as having factories.
Dry Bulk Rotes Source: SEC

2. US Port Delays

CNBC Supply Chain Heat Map Oct 28, 2022*
  • U.S. West Coast ports take biggest hit as spot rate for a container from Asia to the U.S. West Coast has crossed the breakeven point
  • The Biden administration sweeping export restrictions against Russia, hammering its access to global exports following Moscow’s attack on Ukraine.
  • The 2M Alliance of Maersk and MSC has suspended almost half of its U.S. West Coast services in December.
  • Port of New York and New Jersey was the top among all U.S. ports for a fifth-consecutive month based on December data.
  • West Coast ports of Los Angeles and Long Beach experienced the largest drop in trade, according to Josh Brazil, vice president of supply chain insights at Project44, as shippers also rerouted some of their shipments to the East Coast to avoid the risk of a major union strike at West Coast ports.

3. European Ukraine Impact and UK Strikes

CNBC Supply Chain Heat Map Sep 7, 2022*
  • In 2022 the U.S. has imported more goods from Europe than China, a big shift from the 2010s, according to Project 44.
  • Germany’s exports to the U.S. were almost 50% higher in September year over year. Germany’s mechanical engineering sector has boosted its exports to the U.S. by almost 20% in a year over year comparison of the first nine months of 2022, according to Project 44.
  • 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.”

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 Bloomberg

From The TradersCommunity US Research Desk