MarketsFarm — Ocean freight rates are under pressure to start 2023, with the Baltic Dry Index (BDI) dipping to its lowest level since June 2020 as poor demand for vessels weighed on values.
A seasonal slowdown of cargo movement ahead of the Chinese New Year was seen as contributing to the latest softness, despite easing COVID-19 restrictions in the country and expectations for increased demand for commodities.
The BDI, a major indicator of bulk shipping rates, settled at 946 points on Friday, marking its lowest level in two-and-a-half years. The BDI had traded above 3,000 points as recently as May 2022.
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The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels — including capesize, panamax and supramax. It is often seen as a leading indicator of global economic activity.
Container rates have also come down lately. As of Tuesday, Drewry’s World Container Index (WCI), which tracks container rates, has fallen by 77 per cent compared to the same time a year ago. The composite index of US$2,120 per 40-foot container compares with the peak of US$10,377 hit in September 2021 and is about 21 per cent below the 10-year average. However, the Drewry WCI is still up from the pre-pandemic rates averaging US$1,420 in 2019.
Canada is at a freight disadvantage compared to its competitors exporting grains and oilseeds into many markets, with lower freight rates helping counter that disadvantage.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
