BDI index has been falling to its lows in the past 20 months. Due to the sharp drop in freight rates of Cape Hope, the dry bulk cargo bulk shipping market may not be prosperous in the peak season in the fourth quarter in the future.
Last Friday (August 19), the Baltic dry bulk freight index (BDI) fell 41 points to 1279 points, a daily drop of 3.1%, the lowest level since December 2020. Over the past week, due to the unfavorable outlook for China's steel demand and the hot climate affecting the French corn crop harvest, the surplus capacity is difficult to digest, the coal pallet growth is insufficient, and demand for other goods is weak, the BDI index fell for four consecutive trading days as of Tuesday (August 16). Although it rebounded slightly on August 17, it fell again in the following two days.
Among them, the Cape of Hope ship market is affected by the fact that long-range mine routes maintain a low activity, transportation demand continues to be sluggish, and the price reduction of charterers has been significantly reduced, which has prompted the freight rate of Cape of Hope ships that transport more iron ore.
On August 18, the Baltic Cape Hope bulk carrier freight index (BCI) fell 216 points per day to 867 points, falling below 1,000 points for the first time since late January, a daily drop of 20%; on August 19, it fell 111 points to 756 points, a drop of 12.8%, and a weekly drop of 42.5% as the biggest drop in eight months. The average daily income of Cape Hope craft fell $921 to $6,267, far below the cost price of $15,000.
Panamax and ultra-sensitivity ship markets. Although the demand for coal ships from Indonesian to China has increased slightly, the increase in imported coal is still limited due to the stable domestic supply in China. Although the inquiry for grain routes has increased slightly, it is still mainly tentative. In addition, the market for Pacific is still sluggish, resulting in the freight rates of Panamax and ultra-lightweight ships that transport more coal and grains are rising and falling.
The Baltic Panamax Bulk Vessel Freight Index (BPI) fell 61 points on August 19 to 1688 points, a drop of 3.5% and a weekly decline of 11.5%, the biggest drop in a month, with average daily income falling $550 to $15,188. The Baltic Ultra-Sensible Bulk Vessel Freight Index (BSI) rose 37 points to close at 1,735 points, rising for the sixth consecutive trading day, the best week in five months.
Since May this year, the BDI index has been falling. Some ship owners pointed out that this is mainly affected by China's overall demand, especially the spread of unfinished buildings, which has caused China's real estate investment to shrink. As for the recent China's power limit problem, it has had less impact on the steel industry, which is only an indirect factor.
Goldman Sachs (Goldman Sachs) analyzed that China's unfinished building storm hit the iron ore sand price. It is estimated that the supply of iron ore sand may be over 67 million tons in the second half of the year, reversing the supply and demand imbalance in the first half of the year, and lowering the target price of iron ore sand in the next six months from US$110 to US$85.
Since the fourth quarter is usually the peak season for iron ore sand shipments, Yumin Airlines expects that the demand for Cape-type ships may not be strong in the peak season, and daily rents may first return to the cost price level. The subsequent situation remains to be seen, but it is estimated that it will be difficult to reproduce the grand occasion of the peak season when the highest daily rent soared to US$60,000-70,000.
For the small and medium-sized ship market, Huiyang Shipping believes that the cargo sources of small and medium-sized ships are relatively diverse, and the bulk materials transported are mainly coal, grain, various minerals and cement. Even if there is some pressure to lower the price, the decline is not obvious. However, the peak season effect of small and medium-sized ships in the third quarter of this year was not obvious. The reason is that there are some substitution effects of large ships grabbing cargo, and the total cargo volume in the market has also decreased, but it can still be higher than the cost at present.
Despite this, the bulk transport market is not without good news. European and American countries began to stop Russian coal imports in August, and coal must be imported from further countries, which is conducive to supporting the demand for bulk carriers.
In addition, industry insiders analyzed that the implementation of the two major environmental protection regulations in 2023 will affect up to 80% of ships in the market, promoting the accelerated elimination of old capacity. Handheld orders for bulk carriers are at a historical low. Currently, handheld orders account for only 6.57% of the existing fleet, while bulk carriers with a ship age of more than 20 years account for about 7.64%. Therefore, it is not ruled out that the supply gap in bulk carriers will continue to expand after next year. The industry generally believes that 2023 will still be a healthy year for the supply and demand structure of bulk carriers.
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