In this week's BIMCO 'Shipping Data of the Week', shipping analyst Filipe Gouveia focuses on the recovery of the Baltic Dry Index (BDI) in November. So far in November, the capesize market has benefited from an increase in shipments, but the index is still down 10% year-on-year.

"Due to the strengthening of capesize freight rates, the Baltic Dry Index (BDI) has rebounded since early November, but the index is still down 10% year-on-year. Compared to October 2024 and November 2023, the capesize market has benefited from a 1% increase in shipments in November so far. However, the increase is not enough to recover to the highs of the first three quarters of 2024," said Filipe Gouveia, BIMCO shipping analyst.

On November 19, 2024, the BDI reached 1627 points, up from 1374 points on November 4. Previously, due to weak capesize shipments, the index had gradually declined since the end of September. Capesize vessels account for 40% of the BDI, so changes in this market have a significant impact on the index.

Currently, although the Baltic Capesize Index (BCI) has increased by 4% year-on-year, the BDI is still down 10% year-on-year, while other sectors continue to perform poorly. The BDI and BCI indices performed strongly in the first three quarters of 2024, increasing by 41% and 94% year-on-year, respectively.

"The weakness in spot rates for capesize vessels has negatively impacted market sentiment. Since early October, one-year charter rates have fallen by 7%, while the price of five-year-old second-hand vessels has decreased by 2%," Gouveia added.

So far in November, capesize demand has increased by 4% year-on-year, significantly lower than the 7% year-on-year growth rate in the first three quarters of 2024. Due to longer average sailing distances, demand growth has outpaced shipment volume. The transportation of iron ore from Brazil and bauxite from Guinea has increased, resulting in longer shipping distances compared to Australian cargo.

However, although the capesize market is not as strong as in the first three quarters of 2024, it is still stronger than in November 2023. The supply-demand balance has tightened slightly, with supply increasing only 3% year-on-year. This segment has benefited from low delivery volumes, and even with some alleviation of congestion, supply remains low.

The Baltic Exchange Capesize 5TC forward freight agreement (FFA) indicates that the market expects freight rates to remain near current levels in December. The FFA points out that in the first quarter of 2025, rates are expected to decline due to seasonal reasons, well below the levels of the first quarter of 2024.

"Looking ahead, as the market may remain strong, capesize freight rates could still reach this year's highs in 2025. We currently expect the supply-demand balance in the capesize market to remain balanced, with both demand and supply growing by 0.5-1.5%," Gouveia commented.