Atlantic Panamax market plummets as tonne-mile demand falls short

The Atlantic Panamax markets entered the fourth quarter with a cautious outlook due to the ongoing lag in demand for the sub-Capesize sector. The Atlantic market was poised for significant negative volatility during this quarter, as it was no longer supported by longer distances resulting from re-routing due to the Suez Canal disruption, which had since normalized. Unexpectedly, the anticipated surge in end-of-year cargo demand did not materialize, indicating that any potential rate increases would likely originate solely from a scarcity of available tonnage.

Index plummets over 50%

The Platts KMAX 9 Index, which tracks the earnings of Kamsarmax class bulk carriers, plummeted to 54% below last year's levels in the fourth quarter. This significant decline can be attributed not only to the reduced tonne-mile demand resulting from re-routing due to the Red Sea crisis last year but also to an unexpected lack of support from traditional Q4 demand.

The Platts KMAX 9 is a weighted average global shipping index of nine key Panamax routes.

Golden gloom

The first few weeks set the tone for the quarter, with sentiment declining across both the Atlantic and Pacific basins, coinciding with the start of Golden Week in China. Compounding the depressed market conditions, the north experienced a standstill due to a large-scale strike at US ports, impacting critical hubs such as New York and Houston. Container traffic was heavily impacted, raising concerns about potential dry bulk vessel congestion, and prompting market participants to step back and assess how the situation would unfold.

On Oct. 2, Platts, part of S&P Global Commodity Insights, assessed the 70,000 mt Hampton Roads-Rotterdam coal route at $11.75/mt, reflecting a time-charter rate below $10,000/d -- a notable decline not seen since mid-September.

Cropped gains

The return of market participants from the Far East was followed by increasing activity, particularly for US East Coast and US Gulf fronthauls, as well as mineral trans-Atlantic runs. Notably, the 2021-build, 82,000 dwt Vita Unity was heard fixed for a US Gulf fronthaul at $23,000/d with Comerge. However, it became evident that the momentum, which had begun to build, cooled down as the grain outlook remained poor and the tonnage count began to bloat with the conclusion of the holidays.

Moving south, fronthauls initially gained momentum as end-October positions tightened. However, this progress was soon crippled by an increasing ballaster list and cargo requirements that became scarce and continued to remain so.

According to S&P Global Commodities at Sea, trans-Atlantic mineral cargoes maintained a steady flow of shipments compared with both the previous quarter and Q4 2023. Meanwhile, East Coast South America agribulk shipments saw a 41% decrease from the previous quarter, along with a 33% decline compared with Q4 2023.

Late quarter diversion

Coal transatlantic freight remained rangebound, averaging around $9,000/d for the quarter. On Nov. 22, Platts assessed the 70,000 mt Hampton Roads-Rotterdam coal route at $11/mt, reflecting a time charter rate in the high $7,000s/d, which marked its lowest point. However, freight rates eventually recovered a month later, finding support from thinning tonnage and ultimately crossing the $10,000/d mark by the end of the quarter, similar to levels seen at the beginning. The rates peaked on Dec. 24 when they were assessed at $12.25/mt.

Meanwhile, grain fronthaul freight reached its peak performance on Oct. 15, with Platts assessing the Santos-Qingdao grains route at $40.50/mt, corresponding to a TCE of around the low $14,000s/d. However, it steadily declined into the last month of the quarter, ultimately sinking to its lowest point on Dec. 2, when Platts assessed the route at $30.50/mt, corresponding to a TCE of low $8000s/d.

2025 outlook

Commenting on the outlook for dry bulk in the sub-Capesize sector, a source said, "Atlantic Panamax found a pillar of support in the first half of 2024, benefiting from increased tonne-mile demand due to diversions stemming from the Red Sea crisis and an uptick in cargo flows from the frontloading of shipments ahead of the US presidential results. However, with the market no longer supported by tonne-mile demand, a typical soft Q1 approaching, and the trade dynamics between the US and China yet to unfold, the outlook appears bleak, and it is anticipated to be a challenging year for Panamaxes. Furthermore, with the orderbook full and more vessels being introduced into the market, freight levels seem to be losing their lifelines."