Category: Ocean Freight

January 23, 2025

The Cape-size market is quiet ahead of the Lunar New Year holiday next week. At present, while China imports record iron ore in the month of December, the market is well-supplied, and demand is declining. Cape rates languish at low levels not seen for some time, with vessel owners struggling to cover Opex in the Pacific.

Expectations for recovery in the Panamax market are diminished at present, as the Panamax Time Charter Average falls below the $8,000 support level and is currently trading at $7,500 per day. Since mid-December, the Panamax Market saw a gradual increase from $8,750 to $9,500 per day in the first week of January. However, it has since declined, with no clear bottom in sight.

The freight market in East Coast South America continued to face pressure this week, with sentiment for late January and early February remaining weak. Vessel availability for these dates has increased significantly, while fresh demand has been limited, leading to further rate declines.

The current market in the Indian Ocean region remains under significant pressure due to the limited influx of fresh cargo inquiries and an ever-growing spot tonnage list in India. This oversupply of available tonnages is significantly outpacing demand, placing sustained downward pressure on rates. This imbalance has managed to keep fixtures in the region at relatively low levels.

Regionally, in the South Pacific, time charter levels for both handies and ultras have unfortunately again continued their downward trend over the last two weeks.

 

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January 9, 2025

At present, the dry bulk market continues to face challenges due to an oversupply of vessels and low activity levels as we recover from the year-end holidays and anticipate the upcoming Lunar New Year celebration.

The themes discussed in our fourth-quarter reporting continue to impact the dry bulk market. China’s economic issues, particularly those related to the real estate market and local government debt, persist ahead of their seasonal pre-Lunar New Year lull. Contributing fundamental factors include normalized Panama Canal transits returning capacity to the market, a steady increase in new build vessel arrivals (predominantly geared vessels), improved port efficiency, and reduced port congestion. Notably, Brazil experienced lower corn demand from China last year. It remains to be seen if we will again observe the double knock-on effect of reduced congestion at Brazilian grain ports and fewer long-haul grain shipments in 2025, as we did in 2024, along with intra-segment rate cannibalization (Panamax competing with Capesize vessels). More broadly, “effective fleet growth” will continue to exert pressure on our markets. The rerouting of vessels away from the Suez Canal remains a supportive factor. New geopolitical dynamics effecting our markets are additional uncertainty following recent comments by the U.S. President-elect, related to the Panama Canal, Greenland and sanctions.

Looking ahead, after the quiet period during the Christmas and New Year holidays, we anticipate a subdued January leading up to the January 29th Chinese Lunar New Year celebration. Market activity is expected to revive in March as the grain trade shifts to the southern hemisphere and seasonal demand returns across all regions.

Dockworkers on the East and Gulf Coasts reached a tentative labor agreement with employers on Wednesday, averting a strike.

On Monday, the U.S. Pentagon added several prominent Chinese businesses to a list of companies identified as military in nature, including some of the country’s largest internet, battery, science, and shipping firms. This announcement, along with the accompanying media coverage, has introduced additional uncertainty for the shipping markets and charterers considering trades with Cosco. Although the Treasury Department’s SDN list has not been expanded as of this writing, this announcement and the impending change in the U.S. administration has heightened concerns about potential further sanctions.

Future developments will depend on the impact of recent stimulus measures in China and the uncertainty surrounding the new U.S. administration’s influence on trade, global economics, and geopolitical relations. We anticipate stability on the demand side in the coming year, with particular attention to the potential impact of sanctions that previously affected the steel trade and agricultural product volumes during the last round of sanctions under the prior Trump administration.

Analysts hold mixed views on the market outlook for 2025. While some predict a recovery in demand for dry bulk commodities, others remain cautious due to potential economic slowdowns and ongoing geopolitical uncertainties. Considering the fundamental changes on the supply side, we expect slightly lower average levels year-over-year and increased positional volatility throughout 2025 due to the more finely balanced supply/demand ratio in the dry bulk market.

 

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January 7, 2025

Market Overview:

An expected slow start to the week as market participants return to the office after an extended holiday break and today’s Epiphany holiday.

Our market showed some small signs of life during the break; remaining shipments and vessel delays necessitated some spot-fixing. The downward trend and narrow-range trade continued as we started the new year.

A combination of factors is contributing to the malaise in dry bulk rates in Q4, beyond ongoing China real estate markets/local government debt concerns and current seasonal preholiday lull. The contributing factors are fundamental in nature: normalized Panama Canal transits returning capacity to the market this year, a steady increase in new build vessel arrivals (predominately geared vessels), better port efficiency, and less port congestion generally (noteworthy, in Brazil, less corn demand from China. A double knock-on effect of less congestion and fewer long haul grain stems); intra segment cannibalization of rates (Panamax competing with Capes and in some cases Panamax infiltrating non-traditional commodity markets) – more broadly it’s been about “effective fleet growth.” The rerouting of vessels away from the Suez Canal remains a supportive factor.

Looking forward, after quietly moving through the Christmas and New Year holiday lull, we expect a likely quiet January leading up to the January 29th Chinese Lunar New Year celebration and the largest annual human migration in the world. Then, things start to come back to life in March as the grain trade shifts to the southern hemisphere.

The future developments rely on the impact of recent stimulus in China and the uncertainty of new U.S. administration’s impact on trade, global economics, and geopolitical relations. We expect stability on the demand side in the coming year, save impact of potential sanctions on steel parcel trade and Agri. Considering the fundamental changes on the supply side, we anticipate similar levels on average and increased positional volatility in 2025 due to the more finely balanced supply/demand ratio of our dry bulk market.

 

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December 19, 2024

The dry bulk market typically quiets down at this time of the year. Market participants, having secured their December positions earlier, save a few suppliers looking to move inventory within the final quarter, now shift their focus to holiday activities of entertaining clients and attending holiday parties.

This December is shaping up to be one with the lowest levels we have seen in almost a decade. Ending the year on a slow bell, after what was a good improvement in average daily vessel hire rates when comparing the full year averages year over year across all segments.

Currently, the market is characterized by vessel oversupply and insufficient demand, especially for larger vessels.

New vessels entering the market, a normalized Panama Canal, improved port efficiency and the resulting lower congestion, less front haul corn requirement for Panamax vessels to China and the cumulative impact of this effective fleet growth has driven the supply demand ratio into to the charterers favor in the latter part of 2024.

We anticipate continued soft rates, potentially softening further as the year ends and ahead of and during the Lunar New Year at the end of January.

The U.S. President-Elect’s proposed 2025 tariffs have led some shippers to frontload shipments for the upcoming year. The full impact of these tariffs remains to be seen.

Ongoing conflicts and geopolitical tensions, particularly in regions like the Gulf of Aden and the Red Sea, continue to pose risks to shipping routes and overall market stability.

We enter the next year of the inclusion of the maritime sector in the EU ETS, whose intention is to drive the dry bulk shipping market towards greater environmental accountability and efficiency, bringing financial and operational challenges. The system is being phased in gradually, meaning when trading within the EU, ship owners paid 40% of the costs incurred in 2024, moving to 70% in 2025 and 100% in 2026. For our valued clients, we remind everyone that charter parties need to include specific clauses to address the allocation of costs related to EU ETS compliance. This includes who is responsible for purchasing and surrendering allowances. Time and market conditions in 2025 will tell; under the rules, it is the ship owner that is the ‘responsible entity’ and liable to pay for the emissions. However, the rules also give ship owners rights to claim the cost of compliance from the charterers/operators of their vessels. The additional costs of purchasing EU Allowances (EUAs) to cover CO2 emissions are likely to be passed on to charterers and, ultimately, to cargo interests. This can lead to higher freight rates. Charterers should seek vessels that are more energy-efficient to minimize the impact of EU ETS costs. This could influence the selection of ships and the negotiation of charter terms.

On January 1st, 2025, the “Fuel EU Maritime” regulation will be introduced, adding new requirements for the maritime sector to reduce its carbon footprint. From this date, vessels calling at European Union ports will be required to comply with the regulation’s greenhouse gas (GHG) intensity reduction targets. FuelEU Maritime will make it mandatory for marine fuels to be blended with biofuels. FuelEU Maritime is part of the broader EU strategy to achieve climate neutrality by 2050, alongside other regulations such as the extension of the EU Emissions Trading System (ETS) to the maritime sector.

 

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December 17, 2024

Market Overview: 

Our market has continued to trend downward as we approach the year-end holidays, with trading largely confined to a narrow range.

A combination of factors is contributing to the malaise in dry bulk rates in Q4, beyond ongoing China real estate markets/local government debt concerns and current seasonal preholiday lull. The contributing factors are fundamental in nature: normalized Panama Canal transits returning capacity to the market this year, a steady increase in new build vessel arrivals (predominately geared vessels), better port efficiency, and less port congestion generally (noteworthy, in Brazil, less corn demand from China. A double knock-on effect of less congestion and fewer long haul grain stems); intra segment cannibalization of rates (Panamax competing with Capes and in some cases Panamax infiltrating non-traditional commodity markets) – more broadly it has been about “effective fleet growth.” The rerouting of vessels away from the Suez Canal remains a supportive factor.

 

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December 6, 2024

The Baltic Exchange Main Overall Index hit new lows this week, levels not seen since September 2023.

Cape Market continues to struggle with rates the bell weather Brazilian Iron ore flows, all trading at a significant discount this week. Brazil/Europe Cape freight flows are trading now under $10 per metric ton, and front haul movements to China will soon be trading under $18 per metric ton (remember, as of 1-2 months ago, this trade was almost 10 USD more a ton then today’s spot which shows the headwinds the South Atlantic Cape Market has had in the 4th quarter this year).

There are no signs of a recovery in the Panamax market anytime soon. The Time Charter Average is currently trading at half its value compared to December last year, approaching the next support level of $8,000 per day. In the Pacific Basin, despite Beijing’s efforts to sustain the market, freight rates have now leveled off with those in the Atlantic Basin. The market is so depressed that ship owners are willing to compete with the Capesize market to secure employment for their vessels, leading to several Capesize cargoes being split into Panamaxes.

Transatlantic voyages Supramax vessels have been ticking up to around USD 19,000 per day, while front hauls are around USD 20,000 per day. However, many feel that rates may flatten out as the calendar turns to December. The South Atlantic has been facing downward pressure due to a lack of fresh cargoes from East Coast South America. The Continent has not had much activity, while the Mediterranean and the Black Sea have been depressed, with backhaul rates lower than the handy backhaul rates. The market in the Pacific has seen less activity for backhaul cargoes, but there has been more demand for Nopac round voyages.

The past two weeks in the Atlantic market have been active but varied depending on the region. In the US Gulf, the Handysize market remained steady despite a brief increase in activity after the Thanksgiving holiday. In the South Atlantic, the pre-holiday rush created a strong wave of activity, with healthy demand for premium trades to destinations like the West Coast of South America; however, logistical challenges, including weather disruptions in ECSA, led to some delays and renegotiations. In the Far East, steel cargoes are surfacing again in several different directions. However, with a lagging Supramax market, the bigger ships are starting to compete with larger Handies on these backhauls. SE Asia has gained some momentum with coal and wood pellet orders and is looking to source prompt ships.

The South Atlantic shipping markets experienced a volatile week across the Cape, Panamax and Ultra-Supra sizes, with downward trends dominating due to a mix of external factors and bearish market dynamics.

With the UAE celebrating National Day 2024 on Monday and Tuesday, it is no surprise that the Indian Ocean market experienced a notably sluggish start to the week. Festivities and public holidays across the region temporarily reduced commercial activity, leading to a slower pace in the market, which is reflected in the limited availability of cargo entering the market.

When speaking with vessel owners in the Handy, Supra, and Ultra segments in Australia and the surrounding region, we sense a positive atmosphere and some optimism regarding a potential market uptick for the year’s end. However, when looking at the spot Baltic indexes, futures, and oil prices, it appears that the positive sentiment may be more linked to the upcoming holiday season rather than solid market fundamentals.

Regionally, Handy, Supra, and Ultra rates have dropped significantly over the past couple of weeks (see below), and futures prices have also fallen sharply in both segments. Decline in oil prices is also adding downward pressure to freight levels and we are not seeing a noticeable uptick in market orders, making it challenging to share in the optimism.

In the inland barge markets, the USDA reported that grain barge freight from St. Louis to NOLA was trading at 399% of tariff as of November 26, 2024, a 6% increase from the same week last year. Grain barge movements on the Mississippi River for the week ending November 23 were 17% higher than the three-year average for the same week.

 

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December 4, 2024

Market overview: 
Last week, the dry bulk market continued to decline as it closed the week with the Baltic Exchange’s key index dropping to a three-week low as rates declined across the larger sizes. Most significantly, the Cape size market took a hit as it dropped nearly 25% w-o-w, marking its lowest levels since early November. This downturn unfolded amid volatile iron ore futures, which saw fluctuations despite positive trading activity on China’s Dalian Commodity Exchange. This is largely in part due to the market bracing for impact as President-elect Trump has threatened to enforce tariffs more than 60% on all Chinese-exported products.

The Panamax segment extended its downward trajectory, ending the week with its tenth consecutive decline and reaching its lowest levels in over a year. Relative to the Cape size, smaller vessel categories decreased marginally, with both the Supramax and Handysize Indices falling only 1%, remaining relatively stable at the previous month’s levels.

The Supra/Ultramax market in the Pacific experienced a slight uptick especially in the NOPAC prior to Thanksgiving holidays. Optimism persists as adverse weather and ships delaying are expected to tighten availability moving into December. In the Atlantic, rates declined as vessel supply continued to exceed demand, though T/A levels showed a modest w-o-w improvement. Handysize rates in the Pacific remained steady, supported by strong competition for Australian grain shipments and the emergence of forward steel cargoes. Meanwhile, Atlantic rates held firm, reflecting consistent cargo flow throughout the week. In the US Gulf, both Ultramax and Handysize markets saw a flurry of pre-Thanksgiving activity as owners and charterers rushed to secure fixtures. Ultramax T/A and FH routes remained in the high teens, with rate stability anticipated heading into December. The USG Handy market also saw an early-week spike in activity, but rates stayed flat, with over 40 vessels set to open in the USG, NCSA, and USEC over the next three weeks.

Ship recycling activity remains subdued due to several factors, including fluctuating steel prices and unfavorable economic conditions in key recycling markets like South Asia and Turkey. India, historically a dominant player in ship recycling, has faced reduced demand due to declining steel plate prices and currency depreciation. Similarly, Pakistan’s market has been constrained by limited foreign reserves and restrictive financial policies, while Turkey has also seen a slowdown in activity, partly due to lower tonnage availability and economic pressures. Despite these challenges, some stability has recently been observed in steel prices, which may encourage marginal recovery in recycling activity moving forward.

 

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November 26, 2024

Market Overview: 
Last week, the Cape size market experienced a significant decline in rates, aligning with the broader trend in the dry bulk market, largely due to weak demand in the Panamax segment. The Panamax, Supramax, and Handysize segments continued to trade within a narrow range, with an oversupply of vessels exerting pressure across all segments.

Despite concerns about demand, iron ore production remains strong. Major producers such as BHP, Fortescue, and Rio Tinto have either maintained or increased their production levels. Iron ore prices are expected to be volatile due to slowing growth in steel production and increased output from global producers. According to the International Energy Agency (IEA), global coal demand reached an all-time high this year. Steam coal is expected to decline by low single-digit percentages annually while coking coal looks to be flat through 2026.

The robust market conditions have discouraged the scrapping of older vessels, resulting in an aging fleet. However, high secondhand prices, until recently, have encouraged some owners to invest in new builds. Recently, we have observed a decline in secondhand prices.

Approximately 30% of the Handy fleet, 25% of the Supra/Ultra fleet, and just over 25% of the Panamax fleet are 15 years old or older. About half of these percentage numbers represent ships 20 years or older.

 

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November 20, 2024

Market Overview:
Last week, the capesize market showed improvement with robust activity in both basins, while Panamax, Supra, and Handy size segments traded within a narrow range. Panamax ended the week slightly up, whereas Supra and Handy sizes saw modest declines, with long vessel count lists weighing on all segments. Despite low activity levels in most segments, the Baltic Dry Index rose, driven by increases in capesize vessel rates. China’s coal imports surged by 29% year-on-year in October. Brazil’s grain exporters association, Anec, raised its November export estimates for corn, soybeans, and soymeal, although these projections remain below last year’s figures. The EU’s weekly wheat exports totaled 223,323 tons, a 30% decrease in the new marketing year compared to the previous year. Iron ore prices have been volatile as the market anticipates the impact of China’s recently announced economic stimulus on economic growth, amid concerns of increased iron ore supply, healthy inventory levels, and a slowdown in steelmaking at Chinese mills.

 

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November 14, 2024

The Capesize market continues to enjoy improvements daily through a combination of advantageous vessel count and China prewinter restocking.

Transatlantic round voyage rates increased by $3,300 per day overnight, reaching an impressive $25,600 per day, as assessed on average, and are said to be higher in the physical spot market. The benchmark Tubarao to Qingdao route hitting almost $25.00 and front haul in excess of $45,800.

Despite the US observance of Veterans Day and France’s Armistice Day holiday, for Panamax, this week began with increased activity, particularly in the Pacific Basin. Over the past month, the Panamax Time Charter Average has dropped by about 25%, or $3,000 USD, while sentiment is mixed the feeling was expressed we may have found a bottom.

Rates in the Atlantic Supramax market have come under pressure across all regions in the last two weeks as levels have been fixing lower than last done across most trade lanes. The US Presidential Election slowed down an already sluggish Global trade as the world awaited the outcome. Owners have ballasted their vessels to the USG over the last several weeks from other weaker markets and forced rates out of the region lower. Lack of fresh front haul cargoes and more competitive freight on Panamax vessels pushed front haul rates lower than transatlantic business. Supra/Ultra’s in the Pacific have declined over the past two weeks. Holidays and lower volume caused rates to reach some of the lowest levels for 2024.

 

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