I mentioned it here. The Baltic Dry is showing that global trade is not improving while the fleet continues to grow.

It’s the same old scene… as Roxy Music would say. Too much supply, too little demand.

. Fleet growth +6-7% in 2014 and 4-5% in 2015. Roughly 16M DWT (dead weigh tonnage) of capacity was delivered in the first quarter of 2014 (annualized growth of 8%). A huge number not absorbed by demand.

. Spot  rates in the 6 major global routes have averaged $10kpd YTD, down $4-5kpd from last year’s levels.

Demand slowdown:

. Reported chartering data have been relatively flat compared to last year. Chartering has grown less than 1% pa in the past two years while fleet grwoth has exceeded 2.5% pa.

Capesize rates continue their free fall. Despite a solid number of new charters to China, mostly from Australia, spot Capesize rates are now at $9kpd (-64% MTD).  Brazilian activity is still low and Chinese steel demand remains poor despite stockpiles of flat and construction steel products falling, now -15% YoY.

Some positive support short term:

China continues to show strong demand for iron ore imports. Credit Suisse counted 27 iron ore fixtures last week, which is up 20% over the trailing two month average.

… But overcapacity is not addressed

The overall picture for the next two years is a moderation in the overcapacity increase, not an imprvement in the supply-demand balance. It is hard to see dayrates improving dramatically in such a scenario even if global chartering increases 5%.