Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting:Vessel owners have to be asking if the market has hit bottom yet. After this week’s action it is difficult to say much more than things are feeling very weak, and that we must be close to bottoming out. World Panamax rates continued to sink, and with them the financial health of vessel owners and investors. It has been, and still is, a dramatic down cycle that no one was expecting. Just when you think it cannot go any lower, it does. This is truly the shipping recovery that wasn’t. We have not seen the Baltic Panamax Index at the 582 level since early October 2012. Capes are now getting $14,100/day and Panamax vessels about $5,300/day on long hauls.
This week’s excuses wrtr the holidays in Europe, but I don’t see how people can go on holiday unless they have all their business needs covered beforehand. So, it’s really a case of insufficient demand, and the market needs to recognize that and perhaps just stay on holiday until the money runs out. The gap between the bid and ask in freight markets is growing as many operators are holding back and hoping things will improve with time. However, they cannot hold their breath forever. What is trading is mostly for short voyages as operators are reluctantly willing to take a hit on the nearby business just to keep running with the expectation that things will get better on the next round. The physical Capesize market was stable this week, maybe that is a good sign?
According to a maritime CEO “The vast majority of ships on order today have no contractual employment and no evidential income other than indications of future ship values referenced back to the boom years of 10 years ago.”
“…If a shipowner cannot serve his existing bank debt, how is he going to service the new owners of the debt who have much higher expectations of return on their investments than simple bank margins”
Should we root for Brazil in the World Cup or be fearful that, if they win, the celebrations will disrupt port activities?
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 2013 annual totals versus January-May 2014 container shipments for Hong Kong.
