Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Two weeks ago I asked the question: How low can rates go? It now looks like the market is attempting to answer that question. The month of October was seemingly hard enough on vessel owners as global indexes and physical rates basically slid south all month. However, November is not turning out to be any better from an owner’s perspective.
With the Baltic P2 Panamax index in the Atlantic at 9,064 we have reached a new five-and-a-half month low. If things drop just a little lower (below 8,200) we will be back to levels not seen since February of 2014 (7,721). And, if we break through that level we will be back to December 2008 levels. So, the market is truly flirting with disaster for those who own and operate ships. The 2015 low for Panamax rates from the PNW to Japan is $16.00. Beyond that we have to go back to January 2008 and a market low of $13.00. This is the lowest rate I’ve seen for as long as I’ve been keeping records (going back to 2003-plus).
The WTO has downgraded world trade growth this year to 2.8 percent from 3.3 percent; Asian imports are down to 2.6 percent growth from 5.0 percent. Chinese iron ore and coal imports have slowed. So, with no meaningful turn around in sight it is getting very ugly for the shipping industry and those who finance them. As they use to say on the 1980’s TV show Hill Street Blues – “Be careful out there.”
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent year-to-date 2015 versus January-December 2014 annual totals for container shipments to Japan.
