Chart of the Week: The Black Sea Grain Shipments
Dominant Destination: China Receives the Lion's Share of Black Sea Grain Shipments
The initial days of July concluded on a positive note, with a buoyant sentiment surrounding vessel freight rates in the Capesize segment. Additionally, both the Panamax and Supramax segments experienced a firmer momentum. However, the uncertainty surrounding the potential extension of the Black Sea Grain Initiative casts a shadow over the outlook for smaller vessel sizes.
The increasing volume of grain exports from Black Sea countries, particularly to China, is a noteworthy development in the industry. The Panamax vessel size plays a vital role in facilitating these shipments, as depicted in the provided image. The surge in Black Sea grain shipments has been significant, with China emerging as the primary destination, receiving the highest volume of grain from this region.
Amidst the ongoing uncertainty surrounding the potential extension of the Black Sea Grain Initiative in mid-July, notable developments are taking place in China's iron ore industry aimed at improving air quality. Recent decisions made by China indicate a mixed sentiment of concerns regarding Chinese demand. This sentiment has led to a slip in iron ore prices following the order from Tangshan, China's top steelmaking hub, for local steel mills to reduce production as part of their efforts to enhance air quality.
For more information on this week's trends, see the analysis sections below:
Freight Market, Supply, Demand and Port Congestion
SECTION 1/ FREIGHT
‘The Big Picture’ - Capesize and Panamax Bulkers and Smaller Ship Sizes
Market Rates ($/t) Firmer
Towards the conclusion of the second quarter of this year, the freight rates experienced a notable upswing, signaling a more robust momentum in the industry. Simultaneously, the Capesize segment continues to demonstrate a consistent level of momentum, comparable to that observed ten weeks ago.
Capesize Brazil to North China vessel freight rates are now around $21 per tonne, which is a notable $3 per tonne higher than the previous low recorded at the end of week 22.
Supramax vessel freight rates for the Indo-ECI route have demonstrated resilience, maintaining stability at around $10 per tonne. Notably, there is a discernible upward inch in momentum, highlighting a modest positive trend. However, it is important to note that the overall sentiment remains relatively flat, particularly over the past weeks.
Panamax vessel freight rates from the Continent to the Far East have remained consistently above $32 per tonne since the previous week. Notably, it appears that the downward trajectory has been momentarily disrupted during the initial days of July, marking a period of stability in the rates.
Handysize freight rates for the NOPAC Far East route have been hovering below $27 per tonne over the past two weeks without any immediate indication of a sharp downward revision in early July.
SECTION 2/ SUPPLY
Supply Trend Lines for Key Load Areas
Ballasters (# vessels) Decreasing
The initial week of July remains consistent with the declining pattern observed towards the end of June, as the number of ballasters hovers around the annual average for most vessel sizes. However, it is noteworthy that the Panamax vessel size deviates from this trend, showcasing a distinct pattern in contrast to the other vessel categories.
Capesize SE Africa: Presently, the ship count stands only 2 vessels above the annual average of 84, indicating a close alignment with typical levels. However, it is worth noting that during week 13, the count dipped to its lowest point, with a recorded figure of approximately 71 vessels.
Panamax SE Africa: The number of vessels has fallen below the threshold of 150, yet it continues to maintain a significantly higher trend when compared to the annual average of 107 vessels. Despite the decline, the observed figures emphasize the sustained elevation in vessel count, surpassing the typical levels observed throughout the year.
Supramax SE Asia: The current vessel count has sharply declined to 92, positioning it nearly 3 vessels below the annual average. This downward trend suggests an imminent decrease in the forthcoming days, highlighting a potential continuation of diminishing vessel numbers.
Handysize NOPAC: The vessel count stands close to the annual average of 70, reflecting a decline that has dipped below the expected trend for the initial days of July.
SECTION 3/ DEMAND
Summary of Dry Bulk Demand, per Ship Size
TonneDays Increasing
July witnessed a notable surge in demand growth, further propelling the positive momentum in the shipping industry. Among the various segments, the Capesize category continued to attract significant attention, as it consistently experienced weekly increases. However, the Handysize segment continued to face a declining trend during this period.
Capesize: Demand growth has reached its peak for the year, exhibiting a remarkable acceleration. It remains uncertain whether this upward trend will mirror the heightened levels observed towards the end of the previous year.
Panamax: The recent trend indicates a halt in the downward spiral, with a shift towards a more stable growth momentum observed in early July. Instead of a continued decline, we are witnessing a relatively flat trajectory of growth during this period.
Supramax: Sentiment has begun showing gradual signs of an upward trend, reaching its highest level since the end of week 22. This positive shift indicates a growing optimism in the market.
Handysize: The growth of ton days continues to follow a downward trend when compared to the levels observed in week 17, with the most recent peak recorded during that period.
SECTION 4/ PORT CONGESTION
Dry bulk ships congested at Chinese ports
The month of July maintains the positive trajectory observed in the previous month, as congestion levels for Supramax and Handysize vessel sizes continue to rise, indicating a higher volume of shipping bottlenecks.
Capesize: Contrary to predictions of increased congestion, the current number of vessels stands at approximately 118, surpassing the count from three weeks ago by three. Last week, congestion levels peaked at around 130, raising concerns; however, there has been a subsequent stabilization, leading to a gradual decrease in congestion levels.
Panamax: Since the end of June, congestion levels have consistently hovered around 255 vessels, indicating a persistent bottleneck in shipping operations. However, there seems to be a recent trend of congestion stabilizing just below the 260 mark, with only a marginal increase of around 10 vessels compared to levels recorded two weeks ago.
Supramax: The ship count has experienced a remarkable surge, reaching a current total of 280 vessels, which represents an increase of nearly 20 vessels compared to just a week ago. This recent trend in July demonstrates a clear acceleration, surpassing the congestion levels observed in the previous month.
Handysize: As anticipated, the number of congested vessels has indeed surpassed the threshold of 180 since the previous week. In a surprising turn, the current count now reveals an increase of 25 vessels compared to the tally recorded three weeks ago, signifying a significant escalation in congestion levels.
Data Source: Signal Ocean Platform