Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: I must admit that it is difficult for me to see the true justification for the rally in the Dry-Bulk freight markets. But the rally continued on this week, especially in the Baltic indices. Iron ore exports from Western Australia to China reached record levels over the past week, but the Capesize freight actually slipped back slightly as there are still too many vessels versus cargo.
It is the Panamax, Supramax and Handymax markets that are giving support to the market. Capesize vessel daily hire rates are $7,000/day for August. Panamax Dry-Bulk daily hire rates are up to $6,450 for Q4 but are just $5,800/day for 2017. Handymax vessels are getting close to $7,000/day for Q4 and out into 2017. All these hire rates are better than the $4,600-$5,500/day that was seen earlier this year, though still not as big a jump as is indicated by the rise in the Baltic Indices. As mentioned last week, the physical freight market has moved up a bit, but not at all to the degree reflected in the current Baltic Indices. I have heard that much of the buying activity on the Baltic may be due more to paper short covering than actual physical demand.
In closing, we will have to watch to see which of these markets adjusts first to come into better alignment.
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 the Philippines.
