The Dry Bulk Weekly Review in Shipfix Data
During the past week, Shipfix’s forward-looking data set has signalled increasing demand in the Supramax segment, with the Atlantic basin providing support for freight rates. On the other hand, weaker demand in the Pacific has seen the Panamax freight index lagging the other dry bulk segments. Additionally, recent robust spot order volumes for bauxite indicate that global aluminium production will rise in the coming months.
Freight Rates for Supramaxes Supported by Higher Order Volumes
After gaining more than 90 per cent since early August, the Baltic Exchange’s Supramax index is currently at its highest levels since the beginning of November last year. Still, despite the recent rebound, the indicator remains nearly twenty per cent below the levels seen a year ago. Also, the difference is even more significant compared to the same period in 2021, with current levels some 60 per cent below the historical reading. The Supramaxes have seen their freight rate index trend lower for much of the past two years after reaching a thirteen-year high in October 2021.
The past month’s rebound for the Supramaxes has been supported by robust order volumes, with demand in the Atlantic Basin trending higher since the middle of July. At the same time, weekly order volumes in the other basins have remained solid, albeit somewhat volatile. In addition, tonnage supply in the Atlantic and the Pacific has come under some pressure in the past months, contributing to the higher freight rates.
Order volumes in the Atlantic have increased to just shy of fourteen million tonnes in recent weeks, supported by higher demand for seaborne transportation of agricultural commodities. The momentum will likely remain positive in the Atlantic with the US harvest underway. Hence, the freight rates for the Supramaxes look set for a continued positive development.
Panamaxes Lagging Amid Weakness in The Pacific
Over the past month, the Panamaxes have been the dry bulk sector’s laggards. While the Baltic Exchange’s freight index for the segment has advanced by more than eleven per cent since late August, the Panamaxes lag their smaller and larger relatives by quite a distance.
Following a recovery at the beginning of September, global aggregate weekly order volumes for the Panamaxes have faced some pressure over the past fortnight. While demand in the Atlantic and the Indian Ocean has remained robust, a lack of ordering in the Pacific has weighed on the totals. Ordering activities in the Atlantic have been supported by an increased demand for seaborne transportation of agricultural commodities and coal. The latter commodity has also supported the demand in the Indian Ocean.
An increase in vessel supply also contributed to the relative weakness of the Panamaxes. While the supply weakened somewhat in the Atlantic and the Indian Ocean last week, it continued to trend higher in the Pacific, contributing to higher global availability of vessels. Hence, activities in the Pacific may continue to weigh on the Panamaxes.
Robust Order Volumes for Bauxite Could See Aluminium Prices Facing Resistance
Aluminium, a vital part of modern manufacturing, has seen market prices well below the highs seen in January for much of the year. Currently, the three-month futures listed on the London Metal Exchange are trading more than fifteen per cent below the levels recorded in late January, with a disappointing Chinese economic recovery and a strong US dollar weighing on prices. Still, the contracts have staged a modest comeback in the past month and are trading nearly five per cent above the levels in mid-August. Renewed, albeit cautious, optimism over the Chinese demand outlook has contributed to the improving sentiments.
Cargo order volumes for bauxite, a key feedstock for aluminium production, surged during the second half of August and early September. It followed robust volumes in July, signalling that global aluminium production may increase in the coming months, which could put pressure on prices.
China has maintained its position as the world’s leading importer of bauxite. Weekly demand in the spot market for seaborne transportation of the commodity to Chinese ports has averaged 860,000 tonnes in recent weeks. However, the past two weeks have seen order volumes falling to around 600,000 tonnes. The recent drop may not indicate a sustained fall, as this is a typical pattern following weeks of elevated demand.
A recent increase in demand for seaborne transportation to destinations beyond China contributed to the higher global aggregate order volumes. However, the development proved short-lived, with the past two weeks seeing a reduction in such demand. The drop in non-Chinese volumes will weigh on demand in the smaller segments, while the continued robust Chinese volumes will provide support for spot freight rates in the larger segments. The higher cargo order volumes for bauxite may also see aluminium prices coming under pressure amid an increase in global production in the coming months.
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