The freight market has weakened as we approach the end of January and the onset of the Chinese New Year. An oversupply of vessels and declining demand for tonne-day growth are major factors contributing to this downturn. The Capesize segment, in particular, has seen a significant drop in tonne-day growth for shipments from Brazil to China, with the Baltic Capesize Index (BCI) declining by nearly 50% compared to the same period last year, reports Breakwave Advisors.
Fragile Environment
Capesize-laden speeds have fallen to a record low over the past 12 months, reflecting the ongoing weakness in the freight market. The number of Capesize vessels ballasting in the South Atlantic has surged to a record high, exceeding 240 vessels, highlighting the oversupply of tonnage. This situation is further emphasized by the record-low C3 market rates, currently at $17 per tonne. The coming weeks will be crucial for market direction, with the volume of blasters and potential demand growth significantly influencing market sentiment.
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Weakening Momentum
The dry bulk freight market experienced a softening trend in late January, with declining rates across various vessel segments.
- Capesize: Rates for shipments from Brazil to North China stabilized around $17 per ton, reflecting a 5% monthly decline and a 22% year-on-year decrease.
- Panamax: Rates on the Continent to Far East route dropped below $29 per ton, signifying a 30% year-on-year decline.
- Supramax: Rates on the Indo-ECI route fell below $7 per ton, marking a 20% month-on-month decrease.
- Handysize: Rates for the NOPAC Far East route declined to $25 per ton, representing a 16% month-on-month drop.
These declines were attributed to a combination of factors, including weak demand, an oversupply of tonnage, and the impact of the Chinese New Year holiday season on market activity.
Downward Trend
The end of January confirmed a downward trend in dry tonne-day growth across all dry vessel size categories. However, the pace of demand recovery remains uncertain and will depend on market dynamics following the Chinese New Year celebrations.
- Capesize: A significant decline has brought the current growth rate to record lows, compared to the peak at the beginning of the year.
- Panamax: Tonne-day growth has mirrored the recent decline in Capesize ton-miles, reaching one of its lowest levels for January. The weakening trend is expected to continue in the coming days.
- Supramax: The growth rate remains stronger than in other vessel size categories, despite a continued decline from the highs reached two weeks ago.
- Handysize: The Handysize vessel segment has continued its downward trend from previous weeks throughout January, with its latest growth rate now aligning with that of the Panamax segment.
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Source: Breakwave Advisors
