Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: As you can see in the chart below, the Baltic freight indices put forth a pretty good rally this week. The Panamax index rose 24 percent in the Atlantic; the Pacific was up 13 percent. All vessel sectors enjoyed improved daily hire rates for the week. I understand the need for a market bounce but frankly cannot understand the justification for such a big jump. Sellers have been able to push up the market for fixtures going forward for 6-9 months and this has provided for limited support for the spot and 30 markets. The daily hire rate for Panamax vessels has climbed from under $3,000 per day up to about $5,000 per day in the current market.
I think the market is looking at the volume of vessel sales and the consolidation taking place in the industry and believing that this can justify higher rates. For me this situation does not reduce the number of ships in the fleet and therefore the size of the surplus; it only means that vessels are changing hands. It is, however, true that new vessel construction has come to a virtual standstill and that vessel scrapping have been high. So maybe the shipping industry has finally learned its lesson and is beginning to turn the corner on things. But, it will surely be a long gradual turn and not a sharp turn around.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent year-to-date 2016 versus January-December 2015 annual totals for container shipments to Indonesia.
