Asia Dry Bulk – Capesize rates to hold steady even as cargo activity eases

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Freight rates for large capesize dry cargo ships on key Asian routes could remain around current levels next week as activity eases among miners and traders ahead of year-end, brokers said.

Uncertainty over Chinese industrial production and the country’s raw materials import policy are also causing near-term concern, Norwegian ship broker Fearnley said in a note on Wednesday.

But capesize rates, which since August have recovered to their strongest levels in three years, are likely to retain their underlying strength until at least the first quarter next year, brokers said.

Average earnings for capesize ships, which typically haul around 180,000 tonnes of iron ore or coal, are around $26,350 per day, according to shipping services firm Clarkson, compared with $8,208 per day last year.

“We’re approaching the end of the year, so chartering activity is easing,” a Singapore-based capesize broker said on Thursday.

“But there is a lot of resistance from owners with ships operating routes from Brazil to China against charterers pushing rates below $17-18 a tonne,” the broker added.

“Vessel availability is quite tight, although there it not a lot of action in market. Vale and other operators have already chartered around 20 ships which will carry a big chunk of the cargo volume in November and early December,” the broker added.

“Only Rio Tinto and BHP Billiton have been active this week among the Australian miners and there hasn’t been much activity by them. I think rates in the Pacific will come up a bit if vessel operators like Oldendorff and Fortescue Metals come back into the market,” the broker said.

Cargo demand is likely to outstrip growth in the capesize fleet, ship broker Banchero Costa (Bancosta) said in a report on Tuesday that should support freight rates.

Iron ore cargo volumes grew by 4 percent last year compared with 2 percent growth in the capesize fleet in 2016, the Bancosta report said.

Charter rates on the Western Australia-China route fell to $7.64 per tonne on Wednesday against $8.31 per tonne the same day last week. Rates hit $8.98 per tonne on Oct. 17, the highest since November 2014.

Freight rates on the route from Brazil to China slipped to $18.25 per tonne on Wednesday, from $18.41 a week earlier. They marked $19.60 per tonne on Sept. 25, the highest since November 2014.

Charter rates for smaller panamax ships fell this week due to a “lack of fresh cargoes in both hemispheres and a growing tonnage list,” the Fearnley note said.

Rates for a north Pacific round trip voyage dropped to $8,977 per day on Wednesday from $11,023 per day last Wednesday.

Rates in Asia for supramax ships slipped further this week to $6,300-$9,700 per day depending on the cargo and routing.

The Baltic Exchange’s main sea freight index fell to 1374 on Wednesday from 1486 a week earlier.

Source: Reuters

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