Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Dry-Bulk rates are softening again and will likely remain in a quiet and defensive mode for the next few months.
The question really isn’t “have Dry-Bulk ocean freight rates finally recovered?” because they obviously have. Since January 2015 Dry-Bulk Capesize vessel daily hire rates have moved up from $7,500/day to $17,000/day. Since August 2017 rates have been above the estimated profitability threshold of $15,300/day. Panamax and Supramax vessel daily hire rates have gone from $5,500/day to $10,000 plus/day, just inching into a level of basic profitability. As always, most of this has been attributable to China. According to BIMCO data China’s seaborne imports of coal during the first nine months of 2017 grew by 18.7 percent. Imports of iron ore during the first eight months were up by 6.9 percent year-on-year. All together this equated to an import demand growth of 79 million tons of cargo for the two commodities year-to-date. China also set a new world record in steel production for the month of August at 74.6 million tons, or total growth of 5.6 percent for the eight-month period. From BIMCO: “Another record was reached in September, when Chinese iron ore imports exceeded 100 million tons for the first time.”
So, can the Dry-Bulk industry count on China to continue this type of growth and thus support the growing vessel fleet? Net fleet growth for the year is projected to be close to 3 percent. Cargo demand will back off in December and be less robust for the first quarter of 2018, so rates should slip back to some degree. Then we will have to see how Chinese demand builds back up for the balance of 2018.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent YTD 2017 versus 2016 annual totals for container shipments to Malaysia.
