Capesize ships are the only dry bulk ships with average freight rates in the first 10 months of 2019, higher than those in the corresponding period of 2018 with average rates up USD 624 per day, pulled up by the peaks in earnings experienced towards the end of Q3. On the other hand, average earnings fell for all the smaller vessel sizes: -3.2% for Panamax, -12.7% for Supramax and -17.1% for Handysize.

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In addition, in spite of all earnings coming down since their peak in September, they remain much higher than during the first half of the year when rates tumbled. On 1 November, Capesize earnings stood at USD 24,637 per day, Panamax at USD 12,142 per day, Supramax at USD 11,590 per day and Handysizes earning on average USD  8,398 per day. These rates are above the average break-even costs, covering not only operating, but also financing costs.

What is more, agricultural exports have been a mixed bag so far in 2019. While overall soya bean exports from Brazil and the US have fallen 6.8% in the first nine months of the year, corn exports from Brazil and Argentina have been a positive development.

More specifically, Brazilian corn exports went up 123.8% in the first 10 months of the year, with volumes from Argentina increasing 48.7%. This brings total exports from the two countries to 60 million tonnes, or an additional 317 Panamax loads, in comparison to exports from the two countries in the same period of 2018.

On the other hand, the US has seen corn exports falling 44.3% in the first nine months of the year. These strong corn exports boosted Panamax and Supramax freight rates at a time when they were already being pulled up by the strong Capesize market. Ever since, rates for these vessel sizes have fallen.

As for the dry bulk fleet growth in 2019, it is already higher than it has been in any year since 2014. Today, it stands at 3.5%, and BIMCO expects it to increase to 4.1% by the end of the year.

Furthermore, ordering activity has been subdued this year, amounting to 19.9m DWT by mid-November. This is 47% lower than the 37.7m DWT ordered in the first 11 months of 2018, which saw orders for a total of 40.1m DWT.

However, there is a noticeable lack of orders for standard Capesizes this year, with only two ships ordered. This is a fall from the 43 such ships ordered in 2018. For the second year in a row, no Valemax orders have been placed yet, but 38 VLOCs with a total capacity of 8.9m DWT, have been ordered. Also popular are Panamax ships, for which there are 65 new orders to date this year.

Outlook

Earnings have remained at healthy levels moving into Q4, due to a continuation from the high freight rates seen in Q3.

Moreover, the fundamental balance in the market has worsened in 2019, as supply growth outpaced demand. BIMCO now expects that this will continue into 2020 and the fleet could grow by around 3%.

It remains unclear whether the high freight rates in Q3 were due to delayed cargoes from Q1 appearing on the market, or the pushing forward of Q4 cargoes. BIMCO expects the former, but fears that if the latter is to blame, then freight rates will continue to fall in the last few months of 2019

BIMCO concludes.