Ocean freight rates pointed down, but well off year-ago lows

CNS Canada — Ocean freight rates are trending down, but are still well off the record lows seen exactly a year ago.

The Baltic Dry Index (BDI), compiled daily by the London-based Baltic Exchange, provides an assessment of the price of moving major raw materials by sea, including grain.

The BDI was quoted at 702 points on Friday, its lowest level since August and down by 550 from the yearly high of 1,257 hit in mid-November, but still comfortably above the record low 290 hit on Feb. 10, 2016.

Seasonal patterns account for some of the recent weakness in ocean freight, according to a report from the Baltic and International Maritime Council (BIMCO).

The group “expects supply to outstrip demand and a level of loss-making freight rates will follow in its wake” for the January-April period.

However, BIMCO also pointed to a number of factors that may pull freight rates higher in the longer term, with China’s five-year plan to boost its economy and also invest US$503 billion in infrastructure over next three years supportive for dry bulk movement.

Lower freight rates even the playing field for Canadian grain exports to many destinations, as the country is often at a freight disadvantage compared to many of its competitors, such as Australia and the Black Sea region.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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