New markets are being opened up for commodity exporters and primary producers in South Africa and elsewhere by a sharp decline in bulk freight rates, according to Goldman Sachs analysts Christian Lelong and Amber Cai. Daily charter rates for Capesize vessels have fallen from a peak of over $100 000/day in 2008 to current levels below $10 000/day, according to their research. “The size of the fleet [Capesize and Panamax vessels] doubled between 2008 and 2015, and the current order books will ensure that shipping capacity continues to grow until 2017 when vessel retirements will finally outweigh new deliveries,” they say. Oversupply and lower fuel prices should combine to keep rates down until enough older vessels are scrapped to rebalance the market, which will probably happen only after 2020. This is increasing competition among exporters of both commodities and beneficiated products because “when distance matters less, the world appears to be smaller and goods can travel further,” the analysts say. Those hardest hit by the weak freight market are the mining companies that bought vessels and/or entered into longterm period leases at the market’s peak. Mines which use shorter-term shipping contracts and/or third party freight providers will be at an advantage. Customers that could take advantage of the weak rates include power utilities and primary steel and other metal producers which have lower delivered costs and a greater choice of suppliers, says the report.
