Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: We are in the peak of the U.S. fall corn, sorghum and soybean harvest, and domestic rail and barge transportation/logistics appear to be hitting on all cylinders. It is a bit amazing, yet refreshing to be where we are in a record harvest period and not experiencing higher domestic freight costs. Exports are very good for most crops and port capacity is handling the volumes quite well. There are vessel lineups, loading delays and long days worked, but no one is in crisis mode. The only exception to this would be those looking for additional storage capacity in the interior. Dry-Bulk ocean freight rates hit a bottom in February and have improved slightly since then, but the summer rally in rates seems to be losing steam. Even though rates hit bottom and have bounced back a bit, things are still desperate for vessel owners and we remain far from a true recovery.
Just this week I’m hearing analysts project that it could be 2019 or 2020 before things improve for the Dry-Bulk sector. I would not buy any stocks in these companies just yet. The container line markets seemed to have hit at least a temporary bottom this summer, and have bounced up $150-$200/container over the last two-three weeks. However, I’m not hearing anyone suggest that things cannot – or will not – get worse again come February-March 2017. Many are still expecting more bankruptcies in this sector.
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 Taiwan.
