Market Perspectives June 21, 2013

Ocean Freight Comments

Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: The Baltic indices, especially in the Capsize market, were up this week and at their highest level in six months. This was true for the indices, but I don’t see the physical market following to the same degree. We are up a little for the week on some routes. The Brazil to China Panamax and Post-Panamax freight market continues to be offered at aggressive rates.

An ocean freight news wire this week stated, “Something has to give; either rates have to come up or asset values have to drop.” I’m afraid it is the latter that is more likely to occur. According to Simpson Spence Young (SSY) figures, the dry bulk new build deliveries year-to-date totaled 389 vessels (32.3 mdwt). The breakdown on this was as follows: 56 Capesizes of 12.3 mdwt, 128 Panamaxes of 10.5 mdwt, 112 Supramaxes of 6.4 mdwt and 93 Handymaxes of 3.1 mdwt. We are still adding to the world fleet, and the impact of that ought to be obvious.

There is no significant update on the PNW grain elevator labor situation. The wheat harvest is progressing in the South and Central U.S., so we need to monitor the port situation closely.

Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:

The charts below represent Jan.-Dec. 2011 and 2012, annual totals versus Jan.- April. (2013) container shipments for Philippines.