Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: It was an interesting week in global freight markets. Though the Capesize market did not show any notable signs of life, the smaller size vessels (Panamax, Supramax and Handymax sectors) provided good support for the Baltic Exchange and helped to move the BDI index higher for the week. It is looking more and more like we have put a bottom into this market. This does not, however, mean there is sufficient new demand to support and sustain a move to substantially higher levels; but it is likely that the markets have stopped their downward spiral. We must recognize that there remains a large surplus of ships with many at anchor just waiting for better opportunities.
Much the same can be said for containerized grain freight rates, as they too have reached incredibility low levels which deny any profit potential for the shipping line. Container rates from the Chicago area to Asia are as low as $800-$850/TEU. Rates from the U.S. East Coast (Norfolk or Savannah) have been down to $250/TEU and the Los Angeles rates to Asia hit $150/TEU. This is good for grain sellers and end users but not at all healthy for the shipping lines.
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 Vietnam.
