Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: The past two weeks has proven how difficult it is to predict a market bottom. It is amazing that hire rates have continued to slide when they are this far below operating cost. Capesize vessels have been trading at near $3,000/day and say they need close to $6,000/day to break even. One shipping analyst estimates that the Capesize vessel fleet now exceeds cargo demand by 50 percent. Panamax vessel rates are in a similar situation, trading in the $2,500 $3,000/day range.
Market economics are now forcing vessel operators to drop anchor and layup rather than run. This will remove capacity but not eliminate it. The Baltic Dry Index is now 325 and the Panamax Index sits at just 293. Physical dry-bulk grain rates seem to have bottomed/stabilized; maybe further bloodletting can be avoided? Seminar participants in Amman, Jordan last week asked me how they can know what vessel owners are strong and who is in financial danger. In truth every owner is in danger – it is just a matter of degree. So be careful.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to South China:
The charts below represent year-to-date 2016 versus January-December 2015 annual totals for container shipments to Indonesia.
