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Freight Looking at Providing Relief to Beleaguered Forest Owners

There may be some respite for forest owners lamenting the impact of high freight rates on net returns from harvesting. There are real signs that weakening global growth and increased shipping stock is translating into sizable reductions in break-bulk shipping costs. Current freight rates are around US$66-69/JASm³, well off the highs of US$80/JAS m³ earlier in the year. And rates look set to go lower. The following is an excerpt from Galbraiths reflecting on the spot market at the end of August (Note: "Optimism" for shippers means higher freight rates. "Worsening/no good news" means lower freight rates - good for forest owners).

"Last weeks optimism in the Pacific very briefly spilled over into the former part of this week, but this was very short lived as charterers were spoilt for choice in the presence of the mounting tonnage in the region. Further west, the EC Indian market continued to fall rapidly as a result of there being a serious lack of cargo. Handy's seem to have been the worst affected in the Med and Black Sea, with the frequency of spot vessels being circulated increasing. The situation is set to worsen as more tonnage begins the ballast in this direction from the AG/Red Sea. No good news to report from the Atlantic either. A quiet start to the week quickly gained downward momentum, most noticeably in the USG as a result of a glut of spot tonnage and a severe shortage of cargoes to fill them. Very little grain is moving across the board which is certainly a ingredient which can depress any market segment quickly."

The following chart shows the trends in shipping costs. Whilst these figures relate to larger vessels than the Handysize used to ship NZ logs, historically there is a good correlation between Handysize rates and the larger tonnage vessels.