Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: China has been out this week on their Golden Week holiday and this has added to the rather dull and quiet markets. Overall freight markets feel soft, but they have also been quiet this week and therefore do not warrant much change in the rate estimates.
According to vessel owner Pacific Basin: “Despite record scrapping levels, new deliveries of dry bulk ships will outpace the number of vessels demolished by the end of 2016, leaving an unwelcome net fleet growth for the year of 2 percent…in the Capesize and Panamax markets, you are left with a one-way transportation model. It is very difficult to get backhaul cargo because the ships are too big. You are carrying iron ore from Brazil or Australia to China and going back empty, so how can you differentiate yourself as a ship owner? It is only price that counts.”
So, the problem is not yet solved for the shipping industry (Dry-Bulk or Container) and it is still going to be a long voyage back to profitability. I frankly cannot see a true recovery on the horizon yet and believe it will be at least 2018 before the industry has a chance for any meaningful improvement. Of course, that also means that the same is true for my 401K and IRA retirement accounts.
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.
