Drewry: Capesize Misery Continues

Drewry’s latest Dry Bulk Insight report shows that the Drewry Hire Index suffered a further decline in the first month of the New Year. The main culprit was the Capesize segment, where lower demand eventually led to a decline in their freight rates.

The outlook for 2013 remains bleak, with unpromising demand projections keeping the bridge between supply and demand wide enough and delaying the freight market recovery. Dry bulk shipping, for now and at least a couple of years to come, is desperately dependent on growth in commodity trade since ship supply is growing at an unstoppable pace.

Activity languished in the Asian market ahead of New Year holidays in China. To add to the problems, weather disruptions in Queensland in Australia put a further dent on demand in the segment. The ex-tropical cyclone Oswald has disrupted coal shipments from Hay Point, Dalrymple Bay and Gladstone. Major railroads that transport coal from the mines to the ports have been closed by severe weather. Many producers including Xstrata, Rio Tinto and Anglo American have suffered from the bad weather. This caused Capesize freight rates to dip further, which filtered through to the Drewry Hire Index. Prospects look promising for the iron ore market after the Lunar New Year prospects. Restocking after the holiday will create demand for Capesizes.

Harsh drought conditions spread through key US farm states in the Midwest over the first week of February. The prognoses for the US – the biggest exporter of grain –have been slashed by a sizeable extent, but the IGC has raised its grain trade forecast for 2012-13, owing largely to better export prospects from South America and India. Compared with the previous forecast of 62.4 million tonnes, the US is now expected to export only 56.9 million tonnes of grain in 2012-13. In 2011-12, the US had exported 72.5 million tonnes of grain.

Drewry, February 25, 2013; Image: Wikimedia