Dry Bulk Market: The downward revision in the growth of Capesize tonne days in January with the BCI dropping

In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE) continued to grow amid declining demand. As depicted in the accompanying image, the growth outlook for Capesize tonne days in January has been adjusted downward, coinciding with a notable decline in the Baltic Capesize Index (BCI).

Despite the weakening trend in Capesize freight rates, the iron ore market experienced a notable surge in prices before the close of January. This upswing was underpinned by the prevailing optimism that the world’s largest buyer of the steel raw material, China, is implementing substantial stimulus measures to enhance demand. This positive sentiment managed to overshadow China’s soft steel production data for December. On January 26, iron ore contracts traded in Singapore concluded at $135 per metric ton, marking a weekly increase after two consecutive weeks of declines. However, concerns re-emerged in the market as news broke about a Hong Kong court ordering the liquidation of China Evergrande Group, the world’s most indebted developer. This development, associated with China’s struggling property market, reintroduced a denting sentiment into the market as February began.

SECTION 1/ FREIGHT

‘The Big Picture’ – Capesize and Panamax Bulkers and Smaller Ship Sizes

Market Rates ($/t) Mixed

The dry freight market continued to experience a downturn in the Capesize sector, with a discernible trend of near stabilisation observed in the other vessel size categories.

Capesize vessel freight rates from Brazil to North China stayed under $20 per ton since mid-January, indicating a monthly decline of 13% compared to the rates noted in December.
Panamax vessel freight rates from the Continent to the Far East have consistently maintained levels around $40 per tonne over the past three weeks. Market sentiment appears to be holding steady at these levels as we enter early February.

Supramax vessel freight rates on the Indo-ECI route saw a modest uptick to $11 per tonne. Current market sentiment suggests a resilience that may prevent a decline to a weaker trend below the $10 per tonne mark.

Handysize freight rates for the NOPAC Far East route have exhibited stability, hovering around $29 per tonne as January concludes. These levels mirror those observed in January of the preceding year.

SECTION 2/ SUPPLY

Supply Trend Lines for Key Load Areas

Ballasters (#vessels) Increasing

In terms of the number of ballast ships, the trend continued significantly higher for the large vessel size categories, Capesize and Panamax, where the levels seen have peaked at the highest seen from the end of week 40 in the previous year.

Capesize SE Africa: The number of ballasts reached a peak at 118, surpassing the levels of the previous week and exceeding the annual average of 98. It remains uncertain whether this upward trend will persist and lead to new highs in the coming month.

Panamax SE Africa: The number of ballasts surged to 160 by the end of January, marking an increase of almost 30 from the previous week’s levels. It appears that the lows observed at the end of the year, around 70, are now seemingly distant and challenging to reach.

Supramax SE Asia: The number of ballast ships fell below the annual average of 100 amid signs of an increase, while the last low recorded at the end of the year was at around 93. ​​​​​​
Handysize NOPAC: The count of ballast ships increased to 85, a rise of nearly 7 compared to the previous week. Although the onset of the year witnessed a peak, the trajectory in the days ahead remains uncertain.

SECTION 3/ DEMAND

Summary of Dry Bulk Demand, per Ship Size

Tonne Days Decreasing

There is a consistent and notable decline in the growth of demand tonne days in all vessel size categories with the end of January.

Capesize: The situation remains fragile with a significant downward trend with no yet signs of a reversed momentum.

Panamax: The decline still mirrors the steep downward trend observed in the Capesize category, with growth rates at the lowest in a year.

Supramax: The current growth rate seems to be a flattening trend with no significant spikes, while end-of-January levels resemble the sentiment of the previous year.

Handysize: The smaller vessel size is still exhibiting a growth rate that has now descended to its lowest point compared to the outset of the previous year.

SECTION 4/ PORT CONGESTION

Dry bulk ships congested at Chinese ports

No of Vessels Increasing

In the final week of January, there was a notable uptick in vessel congestion at Chinese ports, particularly in the Supramax and Handysize segments, reflecting an increased number of vessels.

Capesize: Capesize vessels maintained congestion levels similar to those observed in the third week of January, hovering around 140. It appears unlikely that the figure will surpass the 150 mark in the coming days.

Panamax: In the case of Panamax vessels, the count of congested ships remained below 220 for the past two weeks, signifying a decrease from the heightened levels of 240 noted at the commencement of the new year.

Supramax: There was a notable increase in congestion, with approximately more than 290 ships affected. This represents an increase of almost 16 vessels compared to the levels recorded in the third week of January.

Handysize: Congestion escalated, surpassing 190, and the question remains whether it will continue its ascent beyond the 200 mark. Notably, in the 50th week of 2023, the figure had reached 200.
Source: By Maria Bertzeletou, Signal Group, https://go.signalocean.com/e/983831/Account-Login/2pt3hd/379490153/h/LcwCB8Lx2kKXoC78vIFJqBLiRY0IY-1g6JrLWhbTjkI