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Dry bulk shipping: Recent upsurge could be ephemeral; fundamentals still remain weak

The BDI witnessed a strong rebound in June, with Capesize and Panamax segments leading from the front. While BCI and BPI gained ~60% each, BSI and BHSI were up 11% and 9% respectively.

• After a quiet start to June, Capesize earnings showed impressive turnaround in the middle of the month, backed by increased activity in both the Atlantic and Pacific basins. A larger number of enquiries from mining majors such as BHP and Rio Tinto lifted sentiment in the Pacific region, pushing average daily earnings by 12%. The dearth of tonnage in the Atlantic coupled with higher shipping demand contributed to a ~20% increase in spot rates on the Tubaroa-Qingdao route. BCI 5TC average rate rocketed ~72%, giving shipowners reasons to cheer as spot rates are at least covering the opex.

• A flurry of activity from the ECSA boosted Panamax freight rates by 61% in June. South American grain season peaked in June, with increased ship demand for loading Qingdao-bound soybean from Santos, tightening the Atlantic market. Sufficient amount of coal cargoes out of East Coast Australia and Indonesia led to an increase in freight rates in the Pacific. Meanwhile, Indonesian government is proposing a tax of 1.5% on the value of thermal coal export. This tax, which is likely to be levied from August, could affect seaborne coal trade.

• Supramax earnings inched up ~11% because of the increase in Chinese restocking demand of nickel ore from the Philippines ahead of the rainy season. More coal exports from Southeast Asia headed towards India and China, in addition to grain exports from the US, lent additional support.
Source: Drewry Maritime Equity Research