Congestion and cargo growth in containerized trades are pushing volumes back into the conventional dry bulk market, with smaller ships benefiting the most. By Michael Hollmann
The rise and rise [ds_preview]in container freight rates showed no signs of slowing down in recent weeks, with spot rates on the all-important Asia-Europe route and some others now well into 5-digit territory. The World Container Index for eight large headhaul and backhaul trades soared by almost 29 % to more than 8,000 $/FEU on average within four weeks.
With carriers scrambling for tonnage to carry as much as high-paying spot cargo as possible, charter rates for container ships also rose faster over the past month: the New Contex jumped by more than 14 % since end of May. Basically, all price and earnings indicators for container shipping keep pushing higher into record spheres, dumbfounding even long-serving industry veterans. Demand side growth seems to have picked up again lately as economies open up further and businesses struggle to rebuild their inventories.
Recent data from Container Trades Statistics (CTS) showed that container loadings worldwide grew by 14 % year-on-year during the first four months and by 7 % versus the same period in 2019. The US consumer continues to be the driving force of container import demand as transpacific headhaul volumes reportedly climbed 45 % year-on-year (+31 % versus 2019).
Meanwhile the latest container handling index from RWI/ISL shows another heavy increase of 8 % in port throughput during May versus April. Seasonal tailwinds and a rebound from the recession last year keep growth on track.
In parallel, the trend in the dry bulk, breakbulk and project cargo markets has turned a lot firmer recently. Charter rates for smaller geared bulk carriers (ultramax/supramax and handysize segments) of 20,000–60,000 dwt and those for multipurpose heavy lift vessels all saw remarkable gains lifting vessel earnings to 11-year-highs or better. Average time charter earnings for 38,000 dwt handysize ships increased by more than 10% from last month to 26,600 $/day while the Toepfer Multipurpose Index (TMI) for 12,500 dwt multipurpose heavylifters jumped by 14.5 % to almost 10,300 $/day. Freight rates in breakbulk business are reported to have improved even a lot faster. Market sources talking to HANSA suggest that operators are now achieving time charter equivalent earnings of more than 30,000 $/day on round-trip business with smaller compact multipurpose ships. »Basically, all operators are fully booked until September. So it is no surprise that the high freight rates are also available for bookings several months ahead, not just for prompt business,« according to a major broker.
From soda ash to bagged rice …
Core cargo segments for multipurpose and for handy bulkers seem to experience healthy growth as the world economy recovers. In addition, anecdotal reports suggest that there is a significant overspill into the conventional market of general cargo and minor bulks that used to be containerized for a long time. One broker named soda ash (used for glass manufacturing and for consumables) as a case in point.
Major import volumes shipped from the Far East to Africa in containers have migrated back to bulk shipping due to shortage of containers and escalating freight rates. Buyers in West Africa for example have shifted their sourcing to exporters in the Mediterranean and the Black Sea, booking lots of 10,000 t of soda ash on multipurpose or bulk vessels. Consequently, breakbulk freight rates in that region increased steeply. Other examples include steel and agriculture products. Greek shipbroker Doric noted that unusually high volumes of bagged rice hit the market in India and further east, lending another boost to an already red-hot handy bulk market. »We guess it’s a side-effect from the overstretched container market,« Doric’s head of research Michalis Voutsinas explained.
Of course, a full picture of the influx of commodities from containers to dry bulk/mpp shipping is nigh impossible to obtain. Peter Doehle’s research division came up with an interesting analysis based on vessel tracking data in its monthly maritime overview report, estimating that as much as 60 million tons of containerized cargo may have returned to the bulk market in the second quarter alone. Most of it is believed to originate from the Far East. Especially, intra-Asia trades were seeking alternatives to containers because of a lack of equipment that hampers growth. Looking at prevailing rate levels in intra-Asia container trades and intra-Asia bulk trades, cargo owners could well slash freight costs by half or more when switching to bulk, Doehle’s research arm said.
