CNS Canada — Ocean freight rates have shown some steady strength over the past two months, with the Baltic Dry Index (BDI) back above 400 points.
The BDI set a record low of 290 points on Feb. 10-11, but has since posted steady gains, settling at 409 on Tuesday.
While that’s still a far cry from the plus-1,200 levels last seen in August 2015, freight analysts are generally of the opinion that the lows are likely in for now.
The BDI is compiled daily by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials, including grain, by sea.
An overcapacity of ships, the slowdown in Chinese demand for building materials, weakness in crude oil and declining commodity prices have all been cited as contributing factors to the lower freight rates, according to freight analysts.
Meanwhile, the recovery off of the lows was tied to improvements in the international equity and commodity markets over the same time frame, along with ideas that the freight market had become oversold.
Lower freight rates even the playing field for Canadian grain and oilseed exporters into many markets. However, the declining rates were unsustainable, as they also caused some shipping companies to dock their boats and others to go out of business completely.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.