Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: From the first quarter of 2016 to the fourth, daily hire rates for most Dry-Bulk vessels have risen enough to cover most of the daily operating cost for ship owners, but not to a level that provides a profitable return. Thus, vessel owners are still in trouble with their bankers. But just like those who rooted for the Cleveland Indians in the Major League Baseball World Series, hopes for a turnaround win seem to be dashed. Baltic Indices are lower this week and have given back most of the technical gains of the last three weeks. Physical rates are always a bit slower to react. Now we are back to reality and the only way forward is to stop building new ships, increase vessel scrapping, and wait for the global economy to pick up and create more cargo demand. However, then we will be faced with the consequences of this solution. Shipyards are suffering and with them sovereign economies. For example: the Korean government has announced a big stimulus package for Korean shipyards to encourage additional ship building demand – just what the global market does not need. It is a shame, but there must be some suffering while getting back to better health.
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 China.
