Capesize vessels continue to thrive on the strength of Brazil-China iron ore trade, while Panamax and geared segments remain under pressure, weighed down by softer agricultural exports.
Two years ago, Doric’s Weekly Insight captured a market grappling with an extraordinary set of global challenges. The International Monetary Fund (IMF) emphasized a confluence of headwinds, including Russia’s invasion of Ukraine, interest rate hikes aimed at controlling inflation, and lingering disruptions from the Covid-19 pandemic, particularly in China. These factors created a highly volatile environment that significantly impacted global trade flows and shipping markets. Against this backdrop, the Baltic dry indices fell sharply, with the Baltic Capesize Index collapsing to four-digit levels at $9,305 daily. The Baltic Panamax, Supramax, and Handysize indices followed a similarly dismal trajectory, ending the second week of November at $14,343, $12,870, and $13,727 daily, respectively.
Fast forward two years, the global economy has traversed a complex recovery path. The battle against inflation, once a dominant global challenge, has largely been won, albeit unevenly across regions. Despite a synchronized tightening of monetary policy, the global economy has demonstrated remarkable resilience, avoiding the much-feared global recession. However, the IMF warns of new risks that could derail growth: an escalation of regional conflicts, overly restrictive monetary policies, China’s slowing economy, and a rising tide of protectionist measures. These risks, though less acute than those of two years ago, create an environment where global growth is stable but underwhelming. The current dry bulk market reflects this complex economic backdrop, with the Baltic indices displaying a mixed performance. The Baltic Capesize Index has shown a robust recovery, with month-to-date gains exceeding $10,000, closing at $26,777 daily. This recovery is in stark contrast to the lackluster performance of other segments. The Baltic Kasmarmax Index, for example, has remained subdued, staying below $11,000 daily for seventeen consecutive trading sessions and ending the week at $10,906 daily. Similarly, the Supramax and Handysize indices, which often serve as barometers for minor bulks and regional trade, continued their downward spiral, closing at $10,848 and $12,337 daily, respectively. The disparity between Capesize and other vessel classes highlights the varying demand dynamics across key commodity trades, particularly in Brazil.
Recent export data from Brazil offers crucial insights into these trends, particularly the strength in the Capesize market. In October 2024, Brazil’s iron ore exports totaled 35.3 million tonnes, a decline from the previous month’s rebound but 5.08 percent higher year-onyear. Exports to China, the primary consumer of seaborne iron ore, increased by 6 percent to 25.9 million tonnes. Shipments to Malaysia, home to Vale’s Teluk Rubiah distribution center, held steady at 2.3 million tonnes, while exports to Japan surged to just over 1 million tonnes, up from 384,000 tonnes the previous year. Year-to-date, Brazil’s iron ore exports reached 324.8 million tonnes, marking a 5.7 percent increase from the same period in 2023. This robust performance has underpinned the strength in the C3 Tubarão-toQingdao route, the key benchmark for Capesize activity in the Atlantic. With just a few trading days in October as an exemption, freight rates for this route constantly outperformed last year’s levels. Looking ahead, Brazilian iron ore exports are expected to gain further momentum. Early November data from Kpler shows 7.1 million tonnes shipped in just the first eight days, suggesting a strong finish to the year as December-loading cargoes are actively chartered.
In contrast, Brazil’s agricultural exports have struggled lately. Soybean shipments totaled 4.7 million tonnes in October, down 16.07 percent year-on-year. This decline reflects seasonal trends, as well as weaker demand from China, which has historically been the primary driver of Brazil’s soybean exports. Year-to-date performance shows a mixed picture, with early-year gains offset by weaker exports in recent months. Despite a strong export campaign in the first half of 2024, Brazilian soybeans faced a significant slowdown during the export months of August to October. This has weighed heavily on the Baltic Panamax Index, particularly the P8 Santos-to-Qingdao route, which has underperformed since mid-year. Corn exports, while slightly more resilient, have also faced challenges. October exports totaled 6.4 million tonnes, a 24.17 percent year-on-year decline. Weak demand from China, coupled with logistical constraints, has dampened export volumes. Year-to-date, Brazil’s corn exports are on track to reach 46.9 million tonnes, falling short of earlier forecasts. Although corn exports saw a brief surge during June and July, the critical August-to-October period failed to replicate the highs of 2023. The first two weeks of November indicate a modest recovery, with 1.7 million tonnes of corn and 1 million tonnes of soybeans shipped. However, these volumes remain below expectations, reflecting the broader challenges in Brazil’s agricultural export market.
The divergence in dry bulk performance highlights the nuanced dynamics of the current market. Capesize vessels continue to thrive on the strength of Brazil-China iron ore trade, while Panamax and geared segments remain under pressure, weighed down by softer agricultural exports. As the year draws to a close, the market’s trajectory will hinge on critical factors: the persistence of robust Chinese demand for iron ore, the recovery of grain exports, and the evolving global economic and geopolitical landscape. These dynamics will not only define the short-term outlook but also influence dry bulk trends well into 2025.
Data source: Doric