Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: How much lower can rates go? Everyone keeps asking that question and every time it seems we have hit bottom, things go a little lower. That is the situation as we move through the first month of 2016. The Baltic Panamax index is now at a historic low of 399. I have keep records on this since 2002 and have never seen it so low. So, “are we there yet?” I do not think we have much room to go lower unless we can go to zero. Vessel owners have been selling ships at highly discounted rates to help with cash flow and others are just dropping anchor and sitting as rates have fallen below operating costs. So, we must be scrapping bottom.
But even if this is true, there does not seem to be much reason for a meaningful market turnaround. It is going to be a very difficult year for the shipping industry. Vessel owners must be thinking about jumping into the ocean while at sea?
PS: You may want to frame this edition of the Transportation Report as it could turn out to be the low point in global ocean freight rates in your professional lifetime.
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 China.
