Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting:Everyone probably knows well that I am not bullish on ocean freight rates for the near term, but I must admit that I keep watching the Baltic Indices and physical markets and wondering when they will finally bottom out. The dry-bulk markets have dropped daily for the past 40 days, and the overall downward trend has persisted since last September. We ought to be finding bottom soon. I cannot remember when I’ve seen the Capesize iron ore rates from Western Australia to China at $4.25/MT. Slow steaming will not alleviate the pain of current rates and therefore increased vessel layups and scrappings will have to ensue. Rates may not go back up much, but we certainly can’t go too much lower. The below soybean freight fixture from Santos Brazil to China for May shipment at just $25.00/MT provides a clear view of the market outlook. I’ve pegged the US Gulf Panamax rates to Japan at $36.50/MT, but have actually heard lower estimates. The last time we saw US Gulf to Japan or China at these levels was in February of 2008. It’s definitely a buyers’ market.
The Chinese New Year falls on February 19 this year and freight markets are hoping for a resurgence in demand once the week long holiday concludes. It may well be wishful thinking, but the market desperately needs something to spur cargo demand.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent January-December 2014 annual totals versus year-to-date 2015 container shipments to Taiwan.
