Miral Shipping Freight Market Report - May-08-09

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Miral Shipping Freight Market Report

Authored on May 8, 2009

The freight market has undergone some change in the past month. In my last report, authored about a month ago, the freight market had been drifting downward, seeking to test previous lows. This occurred approximately two weeks ago when the BDI dropped to 1500, and the Panamax TC average dipped briefly below $10,000 per day. The Capesize TC average moved into the mid-to-high teens. Handys and Handymaxes dropped less percentage wise.

Since then, freight rates in all vessel categories have risen dramatically - The Capes TC average moved up to $10,000 per day; Panamaxes up to $7500 per day and handys and handymaxes up less dramatically (but they also did not fall as far).

Chinese iron ore and coal imports are largely responsible, but there has also been increased commodity movements to smaller developing countries. Also, trade financing is slowly recovering, allowing for more bulk commodity sales. Stimulus spending in China is already resulting in the commencement of infrastructure projects. Iron ore imports there are at a pace to exceed 500 million tons in 2009 - approximately 18% above 2008 levels. Chinese Coal imports are also reportedly up 40% from last year.

The purchase of raw materials and food related commodities are also assisting emerging markets such as Brazil, where the stock market is up approximately 75% from its lows. US stimulus may also have a positive impact on dry bulk freight, but that impact is probably several months in the future.

Today, the freight market has declined a little in the large sized vessels, which is likely due to charterers trying to pull back after the large and rapid increase in rates. There may be a few more days of a mini pull back, but freight levels should remain firm in the short term and may test the levels reached in February, where there was strong resistance.


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