Market Perspectives June 28, 2013

Ocean Freight Comments

Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting:The Baltic Indices continued their rally upward this week. Again, the move was lead by strength in the Capesize market for iron ore and coal. The Dry Bulk Panamax Index is not yet back at its yearly high (1,210 reached on March 25, 2013), but has climbed back to the levels of early March 2013. Logistics have also played a part. The total number of geared vessels waiting to berth in Brazil has climbed above 90 for the first time since October 2012. There are many more vessels waiting if you also include the non-geared vessels, but this will reduce the number of geared Handymax and Handysize vessels available to do other business.

Again, we continue to see better movement in the Baltic Indices than we do in the physical markets for grain freight. The small changes I made on the physical rates this week are mostly motivated by adjustments to the rate structure and spreads than strong moves in the physical markets.

Updated dry bulk new building deliveries to date in 2013 totaled 398 vessels, or 33.3 million dead weight tons (mdwt), according to SSY fleet data. These were split by vessel size as follows: 59 Capesizes of 12.9 mdwt, 129 Panamaxes of 10.6 mdwt, 116 Supramaxes of 6.6 mdwt and 94 Handysizes of 3.1 mdwt. This upward move in the Baltic Indices is wrongfully motivating vessel owners to continue to take delivery of, and order more, ships. No significant new news in 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 Thailand.