The first quarter of 2021 has drawn to a close in what has been perhaps the most extraordinary start to a year on record (in recent history).
Most sectors of the dry cargo freight market experienced rallies of greater than 100% for the year, with the Panamax and Supramax sector leaping from $13,624 per day to $18,829 and $12,500 to $21,089 per day respectively in a three-week run in March, which will go down as one of the hottest runs these markets have ever seen.
Much was made of the Suez canal disruption and, had the Evergiven remained wedged there for a longer period, who knows where the market would have headed.
Alas, all good things come to an end and with the news of the Evergiven being freed just prior to Easter, the wind eased in the markets’ sails and due consolidation has befallen what truly has been an incredible first three months of the year.
The largest driving forces behind the markets’ run has come from the coffers of world Governments attempting to spend their way out of COVID downturns. With these ever greater packages of stimulus, demand for coal, iron ore, grain, lumber and new age minerals (e.g. nickel) has climbed to a 10-year high.
With this demand, we’ve seen the supply of vessels in the world merchant fleet stretched to levels of utilisation not seen since the mid 2000’s super commodity boom. Logistical supply chains in South America, the United States, Australia and China are all struggling to load and discharge vessels, and the ensuing congestion and delays continues to squeeze the vessel utilisation further.
However, as commodity price hikes have eased demand and supply chains have caught up with the backlog, freight rates have finally started to turn lower as the manic frenzy to load vessels has abated.
The news for freight consumers and customers is, however, that whilst the roaring frenzy may be over for the long term, freight rates seem to be reverting to a steady upward trend channel that started back in middle of Q4’20.
Steady spending programs underpinning global seaborne commodity demand, coupled with the lowest new fleet building program in 18 years, means we look set to see freight inflationary pressures in the freight market for consumers over the next 18 months.
For now though, the market is taking a well-deserved break.
Other Opinions You Might Be Interested In…
