The start of the new year brings weaker sentiment in freight rates, with an increase in the number of ballast vessels and significant downward revisions in demand growth. Although December ended with a stable monthly volume of iron ore flows to China (see chart below), January indicates a slowdown in capesize freight rate momentum. It remains to be seen how freight rate sentiment will evolve in the coming days, as China's reopening of COVID -19 restrictions has fueled hopes for stronger economic activity and a surge in imports.
In the iron market, prices rose above $120/t earlier this year, up nearly 50% from November lows. ING recently raised its 2023 iron ore forecast on optimism about China's reopening and now expects prices to hover around $115/t in the first quarter, with a seasonal lull expected during Chinese New Year later this month when steel production seasonally slows.
SECTION 1/ FREIGHT - Market Rates ($/t) Weaker
‘The Big Picture’ - Capesize and Panamax Bulkers and Smaller Ship Sizes
In January, a weaker trend in spot freight rates emerged for all ship size classes, with the decline in the Supramax segment appearing to be more pronounced at the beginning of the new year.
Capesize vessel freight rates fell to $17.7/tonne, down $3.5/tonne from the last few days of December, while today's level is similar to the sentiment that prevailed on similar days a year ago.
Panamax vessel freight rates from the Continent to the Far East reached $35/tonne, down nearly $9/tonne from the Week 40 peak.
Supramax freight rates for the Indo-ECI route fell to $9/tonne, down nearly $8/tonne from week 34, and today's decline is the largest in a 12-month period.
Handysize freight rates for the NOPAC route to the Far East settled at levels around $30/tonne in the second and third weeks of January, although there were some signs of an upturn before the end of the year.
SECTION 2/ SUPPLY - Ballasters (# vessels) Increasing
Supply Trend Lines for Key Load Areas
The number of ballast ships in the Handysize, Supramax and Panamax size classes has increased and has been above the annual average since the end of the second week of January.
Capesize SE Africa: The number of vessels is now 72, 14 more than in the last week of December, continues to increase and is approaching the annual average of 78.
Panamax SE Africa: The number of vessels is now at 115, up 40 from week 50, exceeding the annual average of 100 for the first time since week 34 last year.
Supramax SE Asia: The number of vessels remains above the annual average of 85, although there are signs of a downward trend.
Handysize NOPAC: The number of vessels increased significantly to 82, almost 15 more than the previous week, and there are signs of a further increase towards the end of January.
SECTION 3/ DEMAND - TonDays Decreasing
Demand growth slowed significantly with the start of the new year, with the sharpest decline in demand for Handysize vessels.
Capesize demand ton-days: The downward trend in the three weeks of January supported weaker sentiment in freight rates, which are expected to weaken further by the end of the month.
Panamax demand ton-days: January saw a similar downward trend in the Panamax segment as in the Capesize, although it remains to be seen whether the recent weakness will continue in the first quarter of this year.
Supramax demand ton-days: There are signs of weakness and strong volatility with no clear signs of an upward or downward trend in the coming days.
Handysize demand ton-days: The decline seems to be strongest since the end of November, with a stronger downward correction for the whole of January.
SECTION 4/ PORT CONGESTION - No of Vessels Increasing
In the first days of January, congestion reached a new high, exceeding the high level of week 27, with a significant increase in the Panamax and Handysize segments.
Capesize: The number of vessels increased to 154, 7 more than the previous week.
Panamax: The number of vessels remained at the accelerated level of over 200 since the end of last year, and there are indications that the same record number will be reached by the end of the month.
Supramax: The number of congested vessels increased to 268, 14 more than the previous week, surpassing the last peak of around 260 in week 52.
Handysize: The number of congested vessels increased to over 200, which is 22 more than the previous week and 48% more than week 43 of last year.
Data Source: Signal Ocean Platform