Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: If you look at the Baltic Indices you will see that things are up a little this week. However, it is only very light volume and I have not seen the physical rates follow this trend. As far as marker prices go, please don’t conclude that the freight markets have moved exactly as my rate indications show. I have found the need to readjust the freight spreads between U.S. Gulf and South America and also discovered that I got a bit optimistic on my U.S. Gulf to Egypt and North Africa rates last week. Therefore many of the price movements in this week’s report are simply adjustments to bring things back into alignment. South American freight offers however are down $1.00-$1.50 this week.
The overall market remains at a carry (backwardation) and remains optimistic that things have to get better eventually. Panamax values for March are at $5,400/day while Q1 offers are at $7,000/day and Q4 offers are at $8,000/day. Hope springs eternal.
According to the WSJ, Private Equity Investment funds Oaktree Capital Monarch Alternative Capital and BlueMountain Capital have incurred substantial losses on their investments in financing shipping companies and other related shipping industry investments. Hedge funds like Aventine Capital Group, BlueMountain and York Capital Management have seen as much as a 79 percent drop in the value of their shipping investments. These entities entered the shipping finance game after banks and most traditional funding sources topped out on their lending limits and exited. This new money is what added more fuel to the building programs and greatly added to the additional over supply of vessels. It has been said that shipping generally has two good years followed by seven bad ones. Maybe we are just following that adage?
The West Coast PMA-ILWU container port labor negotiations came to a tentative settlement late last Friday and are waiting for ratification by the union general membership. But the ports are back to work at full speed and trying to get through the large backlog. Prevailing estimates are that it will take three-to-six months to catch up fully and return to “normal” operations.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to South China:
The charts below represent January-December 2014 annual totals versus year-to-date 2015 container shipments to the Philippines.
