MarketsFarm – Ocean freight rates have dropped significantly over the past month, with declining demand out of China behind much of the weakness.
The Baltic Dry Index (BDI), which is a major indicator of shipping rates, settled at 3,187 points on Nov. 2, marking its lowest level in three months and well off the 13-year high of 5,650 points hit on Oct. 7. The index hit a low of 393 points in the spring of 2020 when the COVID-19 pandemic first started disrupting global movement and had generally trended higher until the latest downturn. Current levels remain historically strong.
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Increasing iron ore stockpiles in China have reportedly slowed demand for large capesize vessels, which weighed on the overall index as well. News that coal supplies in China were improving, after the government introduced measures to both increase production and cool usage, added to the recent declines in ocean freight.
The panamax index was down to its lowest level in two months, at 3,644 points. Average daily earnings for the 60,000 to 70,000 tonne vessels that commonly carry grain or coal were pegged at around US$34,400.
The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax.
Canada is at a freight disadvantage compared to its competitors into many markets, with higher freight rates heightening that disadvantage. Canadian grain exports through the first three months of the 2021/22 crop year are running well behind the previous year’s pace as reduced supplies and high prices limit movement.
