Interestingly enough when we look at the smallest dry bulk vessel size for which we have a Baltic Exchange index (Handysize 7 TC, 38000 dwt), this index also seems to bottom around the same time as industrial production restarts. However in March 2021 when containers really started to jump, the H7TC does the same, as shippers that had been moving to containers over the past two decades all of a sudden reversed course and returned to dry bulk handysize parcels as this unexpectedly became the least pricey alternative. This increased competition with traditional handysize cargoes resulting in a further price drive given there was – and is – very little growth in the handysize fleet. At the same time larger handysize stems started to look at Supramax tonnage which by default lent support to that size class (Chart 2).
However, all dry bulk size (Capesize, Panamax, Supramax and Handysize) classes have after a rather disappointing Q1 achieved a stellar upwards rise. Investigating the main drivers behind this, main causes are without doubt the restart of heavy industry in Asia, Europe, South America and the USA with increased demand for iron ore, bauxite, coking and thermal coal helping on the demand side as did continued good Chinese demand for agricultural products although demand in absolute terms doesn’t explain the magnitude of the rise. Just looking at the numbers, it becomes quickly apparent that the main cause for the upward momentum is located at the supply side. On the one hand we have an imbalance of trade which already existed in previous years but is steadily accelerating and makes that most dry bulk tonnage ends up in Asia without sufficient Asia-outbound dry bulk cargo to reposition making that tonnage has to be lured back to the Atlantic through a combination of higher freight rates as well as so-called ballast bonuses. On the other hand we have a very marked increase in congestion in both Chinese and Brazilian ports which binds tonnage and hence reduces available carrying capacity as well (Chart 3).
LARGER HANDYSIZE STEMS STARTED TO LOOK AT SUPRAMAX TONNAGE WHICH BY DEFAULT LENT SUPPORT TO THAT SIZE CLASS.
Chart 1: FBX (USD/40’FEU) 12000 10000
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Source: Baltic Exchange Information Services Ltd Chart 2: H7TC (USD/Day) 40000 35000
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Source: Baltic Exchange Information Services Ltd
Chart 3: China Dry Bulk Port Congestion (vessels waiting) 700
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Unladen Source: Baltic Exchange Information Services Ltd 14 | ADMISI - The Ghost In The Machine | Q3 Edition 2021
Laden
Total
01/03/2018 22/03/2018 16/04/2018 08/05/2018 30/05/2018 20/06/2018 11/07/2018 01/08/2018 22/08/2018 13/09/2018 04/10/2018 25/10/2018 15/11/2018 06/12/2018 04/01/2019 25/01/2019 15/02/2019 08/03/2019 29/03/2019 23/04/2019 15/05/2019 06/06/2019 27/06/2019 18/07/2019 08/08/2019 30/08/2019 20/09/2019 11/10/2019 01/11/2019 22/11/2019 13/12/2019 13/01/2020 03/02/2020 24/02/2020 16/03/2020 06/04/2020 29/04/2020 21/05/2020 12/06/2020 03/07/2020 24/07/2020 14/08/2020 07/09/2020 28/09/2020 19/10/2020 09/11/2020 30/11/2020 21/12/2020 19/01/2021 09/02/2021 02/03/2021 23/03/2021 15/04/2021 07/05/2021 28/05/2021 21/06/2021 12/07/2021 02/08/2021 23/08/2021
03/10/2016 02/11/2016 02/12/2016 03/01/2017 02/02/2017 06/03/2017 05/04/2017 05/05/2017 06/06/2017 06/07/2017 07/08/2017 06/09/2017 06/10/2017 07/11/2017 07/12/2017 08/01/2018 07/02/2018 09/03/2018 10/04/2018 10/05/2018 11/06/2018 11/07/2018 10/08/2018 11/09/2018 11/10/2018 12/11/2018 12/12/2018 11/01/2019 12/02/2019 14/03/2019 15/04/2019 15/05/2019 14/06/2019 16/07/2019 15/08/2019 16/09/2019 16/10/2019 15/11/2019 17/12/2019 16/01/2020 17/02/2020 18/03/2020 17/04/2020 19/05/2020 18/06/2020 20/07/2020 19/08/2020 18/09/2020 20/10/2020 19/11/2020 21/12/2020 21/01/2021 22/02/2021 24/03/2021 26/04/2021 26/05/2021 25/06/2021 27/07/2021 26/08/2021
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