Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: It seems a bit amazing that the Baltic Dry-Bulk freight indices can move up and down by 300 to 600 points per day, even in relatively quiet markets. But I guess that is just evidence of the amount of paper trading that takes place as it does not directly correlate with the degree of rate movement in the physical markets.
This week’s market action saw a continued softening in the Baltic Indices and some slightly lower priced physical vessel fixtures. At week’s end the market is trying to stop the slide and recover slightly; probably with the hope that things will improve once the Chinese return from the golden week holiday. We are of course in full swing with the North America corn and soybean harvest, and vessel demand from the U.S. Gulf is increasing daily.
A note regarding the Panamax Dry-Bulk Ocean freight rates for corn or soybeans to HCMC, Vietnam: The appropriate market spreads on this route are not necessarily a direct thing to rate. If you are going from the U.S. Gulf via the Cape of Good Hope, the steaming time to Vietnam (versus N. China) is shorter, so that freight would be a little cheaper. However, routing via the Panama Canal, the distance is longer and thus more expensive. So, on average maybe it is best just to say that the rate from the U.S. Gulf to Vietnam is about the same as to Northern China (give or take $1.00/MT depending on routing). The freight spread between N. China vs S. China is generally a $1.00-$1.50 difference. Close to 90 percent of the Panamax vessels going from the U.S. Gulf to China are currently going around the Cape rather than thru the Panama Canal.
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 Taiwan.
