HANSA 02-2023

MÄRKTE | MARKETS
Dry cargo market back to the bottom
Freights and charter rates for bulkers are falling over a cliff in January but the outlook for the
year is improving. By Michael Hollmann
The first quarter of the year is always
the worst for bulk carrier owners
and operators: a hangover from the festive
season, Chinese New Year, rainfall
and logistics issues for mining companies
in Australia and Brazil… This
time, the situation gets compounded by
the economic slowdown in Europe and
North America and by another surge in
corona infections (the final wave?) in
China.
Perhaps it is no surprise then that
spot earnings for bulk carriers are off to
a much weaker start than in the previous
two years. As this issue of HANSA
goes to press, average earnings in time
charter trip business are clustered in a
narrow range of 7,200 to 9,600 $ per day
for the main size classes of capesize, panamax,
supramax and handysize. Economies
of scale aren’t worth much these
days.
Not a good omen
A comparison with last year is most
sobering for the smaller geared sectors:
Earnings for 58,000 dwt supramaxes are
currently hovering at 7,200 $/day compared
with 20,000 $ in mid-January
2022, 38,000 dwt handies are stuck with
around 8,000 $ – also down from 20,000
–20,500 $ a year earlier. The usual premium
for trading in the Atlantic (due to
trade imbalance and structural lack of
tonnage…) has almost evaporated: some
9,000 $ on average for handies in the Atlantic
versus 7,500 $ in the Pacific. Longer
westbound trips for geared handies
with commodities like fertilizer, steels
etc. are struggling to fetch 6,000–7000 $
– not a good omen either for multipurpose/heavy
lifter business ex Europe, at
least in the short term. There has been
conspicuous build-up of spot positions –
often euphemistically referred to as
»special positions« by project carriers
themselves – in recent weeks and
months.
Low Baltic Dry Index
Looking at the dry bulk market in total
with the Baltic Dry Index now at 800
points, you have to go back to June 2020
– two-and-a-half years! – to find levels as
low as today. Back then, the market was
awakening from the initial pandemic
shock to embark on a rallye that eventually
took the BDI to a 13-year high in
excess of 5,600 points. The market then
went into decline, slowly at first and then
faster from June 2022. Energy inflation,
loss of economic growth due to the war
and, of course, falling congestion levels
and reduced waiting times added pressure
both on the supply and the demand
side of shipping.
A further negative for geared bulkers is
the growing loss of general cargo
(bagged, palletized or strowed in containers…)
that was spilling over into the
bulk/conventional sector due to capacity
constraints in container liner shipping
during the last two years. The scale of this
»re-migration« of cargo is impossible to
accurately assess but based on anecdotal
evidence from brokers and carriers in the
smaller bulk and mpp segments it must
be significant.
Expectations gradually lifting
However, despite the heavy pressure in
the spot market, it seems that expectations
for the rest of the year are
gradually lifting. Purchasing manager indices
and other indicators looking back a
month or a quarter don’t reflect it, yet.
Perhaps the forthcoming update to the
VIEWPOINT
»We still anticipate
higher box rates than
before Corona«
Container freight rates are likely to stabilize
at higher levels than in 2019 due to increased
slot costs for container lines, according
to Antonios Rigalos, chief growth
officer of ocean freight co-operative
XSTAFF. Founded in 2016 by retailers
COOP (Switzerland) and Colruyt Group
(Belgium), the company is currently in
the process of tendering its members’
ocean freight programme for the year.
How do you at XSTAFF judge the capacity
requirements by your cargo owners for
this year? How are volumes keeping up?
Antonios Rigalos: Since XSTAFF is on a
grow path, our need for transport capacity
is still growing. Beneficial cargo
owners (BCOs) are seeking security,
plannability and stability of their supply
chains and are therefore joining our network
in these uncertain times. Some industries
are affected by shrinking demand
of consumer goods, home &
garden products, indoor & outdoor furniture
– with the effect that stocks are
still full. While demand in the fashion industry
and the food part of retail companies
are less affected or not at all –
same as professional industry products.
Antonios Rigalos
Chief Growth Officer – XSTAFF
© XSTAFF
10 HANSA – International Maritime Journal 02 | 2023