Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: It was yet another dull and soft week in international ocean freight markets. The reported excuse of the week was that the lack of activity was caused by the annual “Posidonia” conference in Greece. In truth, it was a good time for ocean freight executives to take a vacation in Greece as there just wasn’t much going on back at the office, and there may not be sufficient budget to take a vacation next year. The Capesize market did exhibit some stability, but the Panamax markets took it on the chin. The Baltic Panamax index has reached its lowest level in 2014 and is now back to where it was on February 8, 2013. This certainly is not the direction vessel owners expected the market to take in 2014.
The WSJ reported this week that investment funds are starting to pour money into ocean freight because they believe there is nowhere for rates to go but up. This may be fundamentally right, but, as always, timing is everything and it may take longer than they expect to generate an acceptable return.
It does however seem that there can’t be much more down side potential (famous last words) and that we should at least bottom out at these levels. Slow steaming alone will not sufficiently help to cover operating costs at these levels. The current daily hire rates for Capesize Bulk vessels is $13,000/day and Dry-Bulk Panamax vessels are at just $6,200/day for long haul voyages.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent January-December 2013 annual totals versus January-May 2014 container shipments for China.
