The Dry Bulk Weekly Review in Shipfix Data
The past week’s gains for the Capesizes were fuelled by a sharp decline in tonnage supply, according to Shipfix’s data. While demand in the Atlantic showed weakness, Shipfix’s forward-looking data set highlighted a rising demand for the largest vessels in the seaborne coal trade. Still, the fortunes for the segment during the coming weeks will likely depend on developments in the Atlantic basin.
A Drop in Supply Fuelled the Recent Surge in Spot Freight Rates for the Capesizes
As highlighted in a research blog post a month ago, a drop in cargo order volumes for the Capesizes fuelled the 50 per cent decline for the segment’s freight rate indicator during the latter parts of October and early November. Amid weakness across the major basins, weekly global aggregate cargo volumes in the largest segment declined to around five million tonnes, a drop of about a third compared to the average for the preceding six weeks.
A recovery for cargo order volumes over the past month has seen the freight rates recovering, with the Baltic’s Capesize index gaining around 30 per cent during the first half of the month. The improving demand for the segment has been broad-based, but the Atlantic basin has provided much of the upward momentum, both in absolute and relative terms. At the same time as the global demand situation improved, sentiments were initially tempered by an upward trend for tonnage supply. The development was especially noticeable in the Atlantic and the Indian Ocean, while the situation in the Pacific has been more volatile.
In a reversal of fortunes, the early parts of last week saw a drop in demand in the Atlantic basin. The development led to significant losses during the first half of the week, but a late rebound for demand coupled with declining tonnage supplies delivered a substantial rebound on Thursday and Friday. A weekly gain in excess of 22 per cent brought the freight gauge to the highest level in a month.
While the second half of last week was in recovery mode, the recent rebound in weekly volumes took, at least temporarily, a time-out. However, should demand in the Atlantic recover after last week’s drop and supply remain tight, the freight rates in the segment could continue to move higher.
Increasing Demand for Seaborne Transportation of Coal Has Supported Capesize Freight Rates
While the past week failed to match the global cargo order volumes for Capesizes recorded during the preceding one, the aggregate was broadly in line with the weekly average for the year so far. In recent weeks, the spot demand for seaborne transportation onboard Capesizes has been supported by a greater interest in shipping coal. Since the middle of October, weekly cargo order volumes for coal have increased by nearly 150 per cent to 2.7 million tonnes. However, while the recent weekly readings remain above the average for the year, they fail to match the levels seen in September. At the same time as coal has seen recovery, spot cargo order volumes for other commodities have been trending somewhat lower over the past two months.
Should the recent upward trend in demand for seaborne transportation of coal remain in place, it will provide further support for Capesize freight rates. However, the seasonal patterns of cargo order volumes for coal and other commodities suggest that the rebound may run out of steam as we enter the year's final month.
Rising Demand for Capesizes in the Coal Trade from Southern Africa Has Provided Further Support for Freight Rates
Among other things, an increasing demand for Capesizes loading coal in South Africa and Mozambique has contributed to the recovery of the spot freight rates in the largest segment over the past week. Following a lengthy period of depressed demand for Capesizes in the spot coal trade from Southern Africa, the past week produced the year's highest reading. The improving demand for seaborne transportation of coal onboard the largest vessels this week is partly due to a recovery in shipments from the region but is also, to some extent, the result of a shift away from the Panamaxes. The increasing demand for the Capesizes in this trade has also seen the Supramaxes ceding some of its market share.
Shipments to India have fueled the increase in demand for Capesizes loading coal in Southern Africa. At the same time, the relative decline in demand for Panamaxes and Supramaxes in the trade is also linked to India. Hence, should developments this week prove to be long-lived, it could contribute to a continued recovery for the Capesizes at the expense of their smaller siblings.
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