What's Going On With Dry Shipping?

Dry bulk shipping sot rates have been on the decline, but according to J.P. Morgan analyst Corrine Png, the forward curve suggests higher rates ahead, even in a seasonally weak Q3.

The Baltic Dry Index (BDI) declined week-over-week (W/W), with Capesize earnings off 22 percent to $6.6K/day and Panamax earnings down 8 percent to $6.2 K/day.

Looking ahead to Q3, Png notes that the forward curve points to Capesize TC at $9.0K/day, Panamax TC at $5.4K/day, Supramax TC at $5.9K/day and Handysize TC at $4.6K/day.

Capesize chartering activity was up 17 percent W/W last week and up 14 percent Y/Y: 64 percent will carry iron ore (versus 76 percent the previous week) and 33 percent will carry coal (versus 10 percent the previous week).

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In the past week, China and the rest of Asia’s shipping demand climbed while Europe’s share declined. Of all Capesize vessels chartered, 69 percent were meant to carry cargo to China (versus 52 percent the previous week).

The number of Panamax ships chartered fell 36 percent W/W to 37 vessels, and the number of chartered Handysize vessels also declined 78 percent.

Global bulk shipping capacity remained unchanged M/M at 778.2 MM dwt.

Png says that the current orderbook implies 8.3 percent supply growth in 2016, but J.P. Morgan anticipates that net supply growth will come in much lower at around 2.6 percent due to vessel delivery shortfalls.

The Guggenheim Shipping ETF SEA is down 7.9 percent year-to-date.

Disclosure: the author holds no position in the stocks mentioned.