The seasonality that usually dictates dry bulk freight worth actions within the second quarter is more likely to take a again seat this 12 months to the challenges being posed to the spot market by unstable bunker costs, excessive commodity costs and disruptive geopolitical occasions.
Dry bulk freight spreads between totally different ship sizes flipped significantly in Q1 as bigger Capesize tonnage registered far decrease time constitution equal charges or earnings in contrast with smaller Kamsarmax and Supramax bulkers — and this development might reverse within the present quarter, market watchers mentioned.
The Cape T4 index, a commerce flow-based weighted common of 4 key Capesize routes, averaged at simply $11,435/d in Q1, effectively beneath the $25,227/d and $22,622/d averaged by the APSI 5 and KMAX 9 indexes, that are a weighted common of 5 key Asia-Pacific Supramax routes and 9 key Panamax routes respectively.
Going ahead, points just like the persevering with Russia-Ukraine battle, COVID-19 associated protocols at ports and a agency container market are anticipated to affect spot freight charges.
A Singapore-based ship-operating supply mentioned merchants had been hesitant to “take a name” in the marketplace in Q2 because of excessive commodity costs, which he mentioned might stabilize provided that there may be an finish to the Ukraine struggle.
Coal heats up
One other ship-operating government mentioned stock-and-sale exercise amongst coal merchants was adversely affected by excessive commodity costs and freight charges, which in flip might result in a decline in delivery actions. Whereas buying and selling margins stay skinny, the challenges in securing financing in a high-commodity worth atmosphere are multifold.
In reality, the world’s two largest coal importers, China and India, have change into extra price-sensitive to modifications in coal costs, with each buying smaller parcels that had been moved primarily on Supramax ships relatively than bigger Panamax vessels in Q1, delivery market sources mentioned.
The 2 energy-hungry international locations have additionally reacted to increased seaborne coal costs by rising home coal manufacturing to additional to scale back reliance on imports, which might subsequently restrict delivery exercise for transporting coal.
The Capesize market, which was underneath strain in Q1, might have a greater run within the present quarterd with Brazilian and Western Australian iron ore majors anticipated to extend manufacturing and exports after the completion of upkeep, and as seasonal weather-related disruptions ease in Q2.
Whereas help for the Capesize section is anticipated by way of burgeoning ton-mile demand because of extra coal being delivered into Europe on these ships, some market sources count on this development to end in extra vessels opening round Europe and thereby pressuring trans-Atlantic and front-haul freight charges.
West Africa is rapidly turning into a serious Capesize loading location, with demand for delivery out bauxite and iron ore surging from this area. China imported a document 21 million mt of bauxite over January and February — 55% of it from Guinea, with majority of cargoes transferring on Capesizes.
Out of the Asia-Pacific, the Supramax sector was the beneficiary of sturdy bauxite motion from Indonesia in Q1 on the again of market chatter that Jakarta might restrict exports later within the 12 months.
The uncertainty attributable to the Russia-Ukraine battle has additionally resulted in lots of shipowners preferring to commerce their Panamax, Supramax and Ultramax vessels within the Pacific area.
With hefty premiums being sought on spot ships for transferring cargoes from the Pacific to the Atlantic, charterers are speeding in to repair ships on interval constitution to be able to lock in tonnage for longer durations, sources mentioned.
Some contributors argue that the excessive charges for interval fixtures within the Supramax and Ultramax segments within the mid- to excessive $30,000s/d vary replicate the underlying energy available in the market going ahead.
Shipowners are additionally relying on operational inefficiencies corresponding to an absence of marine pilots, port congestion, provide chain bottlenecks and delays attributable to crew modifications, which had been dominant components final 12 months, to once more assist drive up freight charges in Q2.