Although the January period ahead of Chinese New Year on the 29th is ordinarily tight for dry bulk ocean freight, the general speed of bulkers across the globe is at its lowest level in more than 10 years.
Apart from data by Italian maritime consultancy Banchero Costa confirming the depressed state of the dry bulk market, Greek sea trade brokerage Ursachart added that the monthly average sailing speed was currently sitting at 10.59 knots or 19.6 kilometres an hour.
In December and early January, the average speed for dry bulk vessels had been recorded at 10.66 knots, widely held as a worrying low for the industry.
On Tuesday, the Baltic Exchange's dry bulk index fell for the sixth consecutive session, reaching a low not seen in over a year, as rates weakened across all vessel segments.
The sluggish freight rates are also affecting the sale and purchase market, with an increasing gap between buyers and sellers.
Brokers from Hartland Shipping Services in the UK remarked in a recent report that buyers were looking for discounts due to the weak freight market, while sellers were either benchmarking against sales from December or holding off to see if earnings improved after the Chinese New Year holidays.
This situation reflects broader trends within the industry, where economic uncertainties and fluctuating demand are prompting cautious behaviour among stakeholders as they navigate these challenging conditions.
The downturn in the dry bulk market is attributed to several factors.
As the Chinese New Year approaches, many factories across China begin to shut down operations, starting as early as January 22. This results in a significant reduction in production and shipping activity as businesses rush to complete orders before the holiday.
Consequently, the pre-holiday surge in shipments leads to congestion at ports, which can further slow vessel speeds as they wait to load or unload cargo.
The rush to ship goods before the holiday often leads to increased demand for freight services, which can drive up transportation costs. However, this year has seen a more subdued response, with many stakeholders anticipating a slower market. Analysts have noted that an oversupply of vessels coupled with low activity levels has contributed to the decreased average speeds of bulkers.
Broader economic issues within China, particularly related to the real estate market and local government debt, have created uncertainty in the shipping sector. These economic pressures have led to a cautious approach among shipping companies and charterers, resulting in reduced operational speeds as they navigate these challenges.
The upcoming holiday also means that a significant portion of the workforce will take extended leave, leading to reduced staffing levels at ports and logistics hubs. This shortage can cause delays in operations even before and after the holiday period, contributing to lower average speeds for vessels.
There is an overall sense of caution in the market as stakeholders await potential changes in demand post-holiday. Many are concerned about whether there will be a rebound in activity after the Chinese New Year celebrations conclude, which could further influence operational decisions during this period.
