There are several contributory factors behind the recent fall in dry cargo rates but the unwinding during October of a record number of vessels tied up in China has certainly been significant.

Congestion in China during 2021 has been substantially greater than in previous years and during Q3 never numbered less than 500 vessels, peaking at a high of around 640 vessels (114 Capesize, 220 Panamax/Post Panamax, 185 Supra/Ultramax and 127 Handysize) near the end of September. Today that figure is around 427 with all sectors seeing reductions in waiting tonnage (67 Capesize, 158 Panamax/Post Panamax 109 Supra/Ultramax and 95 Handysize); the release of over additional 200 vessels onto the international market in a month has clearly led to a shift in the supply/demand balance in the Pacific with a knock-on effect globally.

Clearly logistical issues have led to increased delays this year; the reoccurrence of covid has led to tighter restrictions for vessels arriving in China whilst various ports have been locked down at times and a lack of pilots and stevedores at certain ports especially in the Yangtse River has accentuated these delays. As such average waiting times outside ports in China rose to over 5 days in Q3 compared to 3.5 days in the corresponding period last year. Though some of these covid restrictions are now easing the sharp drop in Chinese congestion over the past month has more to do with less vessels arriving in China which for October was down 22% year on year.

The well documented power outages and reductions in industrial activity are starting to bite with for instance monthly steel production in China falling from 100 MMT in May to 75 MMT in September and perhaps an even lower figure in October.

After the strong inflow of grain in Q2 and Q3 that too has seen a sharp fall-off whilst coal imports lag last year, and minor bulk discharge may also be negatively impacted by energy rationing as well as current high commodity prices. Until there is a bounce in demand continued month on month reductions in tonnage arrivals in China may further reduce congestion in the short term.

Though the congestion story largely revolves around China it should be noted that delays elsewhere in the world remain at historically high levels.