Dry Bulk

No Shanghai headache

The coming months look promising for dry bulk

The bulk carrier freight market has shrugged off China’s lockdowns in May. China’s iron ore imports continued to lag their year-ago numbers, reaching an estimated 90.3m tonnes in April after 87.7m tonnes in March and 85m tonnes in January, according to bulk cargo tracking outfit Oceanbolt. For reference, volumes in February to April 2021 were 88.3, 97.5 and 91.8m tonnes. May’s imports could turn out to be highe. Estimated imports were already 61.2m tonnes for the first 17 days. Second, iron ore freight rates from Australia to China have improved 77% from $8.91 on April 19 to $15.74 on May 18. Improved activity levels in the capesize fleet have moved the dial on the Baltic Exchange’s capesize 5TC average from $11,127 on April 19 to 34,531 on May 18, a three-fold increase.

The Baltic Exchange’s panamax time charter average for April was $25,181 compared to $26,110 in March, while in the first 17 days of May it was $27,533. The year to date average is $23,270, following the 2021 average of $25,408. A theme is emerging here of steady, profitable levels – a kind of sunlit uplands whence panamax owners would be disheartened to depart. Fortunately, the fundamentals of supply and demand, and the auguries of most shipbroker research departments, suggest that their sun-soaked sojourn could last several years yet.

Grain export volumes this year are over 200m tonnes, suggesting that (with seasonal adjustment) last year’s 587m tonnes could be beaten, because of rather than despite the potential loss of exports from Ukraine as other exporters take up the slack. In May, India banned wheat exports, which amounted to 7m tonnes over the previous seven years, so the announcement has caused more media excitement than in the commodity trading markets. Even so, wheat prices added 6% on the news and traders suggest the export ban will add to the shape-shifting global grain market.

Coal, the other major panamax cargo, also continues to rise in price, with Australian exports hitting $400 a tonne on May 15. China and India remain the big buyers of Indonesian and Australian coal respectively. Although China wants to raise domestic production by 300m tonnes from this year to insure against high prices, importers are being encouraged to source more overseas product as domestic lockdowns limit the cabotage trade. Global coal exports were 122m tonnes in March, the third highest monthly total on record. April export volumes were down to 114.5m tonnes, while estimates for May are around 112m tonnes. A hot summer beckons in the northern hemisphere, which may drive coal demand for electricity generation as several billion air conditioning units are switched on.

As usual, supramax time charter equivalent earnings have broadly tracked and exceeded those for panamaxes. The Baltic supramax 10TC average rose 9% in the month to 18 May when it hit $30,336. The year to date average is $26,533, just $130 a day short of the full year average for 2021. The recent rise could be due to a big recovery in Chinese steel exports.

Global steel exports of 148m tonnes last year returned to the long-term average after the 2020 fall to 126m tonnes. Global export volumes of 47.5m tonnes in the first four months of this year suggest that they should approach last year’s total. Last year’s 132m tonnes global forest products exports will take some beating, being an all-time record above 2018’s 125m tonnes. But 44m tonnes of exports in the first four months of 2022 including 12m tonnes in March and 11m tonnes in April suggest another bumper year this year.

For now the geared bulkers are doing very nicely thank you with the Baltic Exchange’s handysize average rising from $28,800 in April to $29,718 for the first 18 days of May. No wonder that handysize five-yearold values have almost doubled this year to $28.5m according to handy specialist broker Hartland. ●