Increase in Global Spot Chartering Activity

Through the first three days of this week, the Baltic Dry Index has decreased by 59 points to 755 points. This represents a decrease of 7.2% from the end of last week. However, global spot chartering activity has increased this week. In total, 54 cargoes have been chartered in the spot market so far this week. In comparison, 47 cargoes were chartered during the first three days of last week. Dry bulk freight rates have fallen, but sentiment is improving with more vessels being chartered for period deals. In particular, this week has seen a large amount of panamax vessels chartered for lengths of over one year.

Record Iron Ore Production in Australia

Rio Tino and Fortescue have reported Q2 iron ore production figures. Both miners reported record levels of iron ore production -- which is especially encouraging for the second half of this year, as Australian iron ore production peaks during the second half of every year. Rio Tinto reported a record 73.1 million tons of iron ore was produced during Q2 2014, which was 6.7 million tons (10%) more than was produced during Q1 and 7.1 million tons (11%) more than was produced during Q2 2013. Fortescue reported a record 43.8 million tons of iron ore was produced during Q2 2014, which was 14.2 million tons (48%) more than was produced during Q1 and 9.4 million tons (27%) more than was produced during Q2 2013.

Going forward, an even larger amount of iron ore is expected to be produced during the second half of this year in Australia, with Brazilian iron ore production also expected to increase by a significant amount as well. Iron ore import prices will remain low, which will remain very encouraging for Chinese steel mills. Chinese steel mills are able to purchase low priced iron ore imports, which has allowed Chinese steel mills to see much better profits during the last several months. Chinese iron ore miners, with much higher costs than Australian and Brazilian iron ore miners, should not be producing. It is helpful for China to be able to purchase low priced iron ore imports. In addition, Australian and Brazilian iron ore is of much higher quality than domestic iron ore mined in China, and therefore consuming imported iron ore pollutes much less than consuming domestic iron ore produced in China.

Global Grain Export Forecast Update

The United States Department of Agriculture (USDA) has released its latest forecast for 2014/15 global grain trade. The USDA now predicts that approximately 339 million tons of grain will be exported worldwide during the 2014/15 grain trade marketing year. This is 700,000 tons less than its previous trade estimate released one month ago and 23.5 million tons (6%) less than is estimated to have been exported during the 2013/14 grain trade marketing year. Soybeans are not officially classified as a grain and are presented in a separate estimate by the USDA. The USDA currently predicts that 113.3 million tons of soybeans will be exported worldwide during 2014/15. This is 1 million tons (1%) more than was predicted a month ago and 1.7 million tons (2%) more than is estimated to have been exported during 2013/14.