Mixed prospects in freight markets following slump in prices
Freight markets slumped earlier this year as disappointing spot demand and concerns about weakening global economic growth dashed expectations for a strong start to the season. The Baltic Dry Index (BDI), which is a benchmark for costs across dry bulk segments, slid to its lowest in around two and a half years in February. Despite a slight recovery since then, the Index was still 38 percent lower y/y as at late-March, reflecting a market which continues to grapple with overcapacity. In a longer-term perspective, the Index remains well below historic peaks of a decade ago.
Although prices for ocean transportation of grains and oilseeds displayed a somewhat steadier tone they, too, fell sharply in 2019. Prices stabilised or advanced recently, led by Brazil, which saw particularly strong soybean shipments. However, overall prospects for grains/oilseeds freight markets across key exporting origins remain mixed, in part because of variable trade forecasts.
Whether the current positive momentum in the grains and oilseeds carrying sectors is just a short-lived correction or the beginning of a longer-term trend remains to be seen. Sustained flows could support a recovery, however values remain vulnerable to periodic shifts and volatility amid persistent headwinds. These include the sector's overcapacity; geopolitical uncertainties; costs associated with forthcoming low emissions regulations; and deteriorating macroeconomic conditions in many countries.