Market Lead Time Index
Shipfix not only provides insights into the historical, current and future supply and demand of maritime trade, but also ‘metadata’ around how market participants are behaving at any given time. We provide unprecedented insights into ‘market sentiment’ and how ‘firm’ or ‘soft’ the market is, has been, or is likely to be in a given area or route.
One example is the Shipfix ‘Market Lead Time’ Index which monitors the behaviour of average market participants, specifically the average number of days (the time spread) between the first time orders enter the market, and the first advertised loading date (first lay day). Aggregated and anonymised data can be analysed over time, since 2015.
The index provides an insight into maritime market volatility, in particular, when tracking supply or demand on particular routes, seasonality on specific commodities, or to better understand current, historical and future market conditions.
Numerous factors can affect ‘Lead Time’:
- Load Areas Vs Vessels Positions:
Example 1 ECSA: if the load area of an order (cargo) is one where fewer vessels tend to discharge relative to loading, the ‘lead time’ will often be longer. One example being East Coast South America, where charterers tend to circulate orders further in advance than other areas, given the longer ballast required. Alternatively, If there are lots of vessels already ballasting from Asia to ECSA, a charterer with an order from ECSA may decide to ‘watch and wait’, and not market his cargo until the last minute and only then to a select number of owners/brokers so he can quietly fix a ship.
Example 2 BALTIC: Generally, a great number of vessels discharge ‘on the Continent’ (North West Europe), meaning orders from the Baltic Sea tend to have shorter ‘lead times' than for example ECSA (contrastingly, if there are fewer available vessels in the Baltic area or nearby, the charterer may need to take a ship from as far south as the Mediterranean, hence the ‘lead time’ will tend to rise, and so will the market rates.)
The below graph illustrates this by showing the difference in the ‘lead time’ for cargoes to be shipped from ECSA vs. Baltic Sea.
- High Order volumes (demand) - a firm Market: if the demand in an area outweighs the volume of 'open' tonnage (supply) this can lead to a ‘firmer market’. Charterers may come under pressure to market orders (cargoes) earlier to secure tonnage sooner, or from further afield. As a general rule, a ‘firming’ market will tend to push the ‘lead time’ upwards, in advance of market rates. If the 'lead time' for a given area is greater today than in previous days/weeks, this can provide a valuable forward signal for market participants.
- High Tonnage volumes (supply) - a Soft Market: if the supply in an area outweighs the volume of orders (demand) this can lead to a 'softer market'. Charterers are under less pressure to market orders (cargoes) in advance and as a result the ‘lead time’ may be relatively short. As a general rule, a ‘softening’ market will tend to push the ‘lead time’ downwards. If the 'lead time' for a given area is shorter today than in previous days/weeks, this can provide a valuable forward signal for market participants.
