30-09-2021 Transpacific capesize bulker rates drop, signaling normalization, By Michael Juliano and Holly Birkett, TradeWinds
Rates for capesize bulkers on transpacific roundtrips plummeted on Thursday, halting the bull run in the Baltic Capesize Index that has been ongoing since late last week. Spot rates on the China-Japan transpacific round-trip (C10) between South America and Asia were assessed 6.6% lower on Thursday at $77,723 per day, according to Baltic Exchange data. By comparison, the benchmark round-voyage from China via Brazil lost only $159 per day to come in at $64,255 per day.
“It was the C10 that was the only weak part of the index, but one should bear in mind that this particular route has been the strongest and even now it is some $13,000 above the Brazil-China roundtrip,” John Kartsonas, founder of asset-management advisory firm Breakwave Advisors, told TradeWinds. “Eventually some normalization will take place, and for now it is in the form of a marginally weakening Pacific market.”
He said Thursday’s dip in the transpacific rate assessment is not yet meaningful, amid instability caused by cyclone disruptions and a volatile iron-ore market. “Also, the futures market is at a steep discount to spot, so the expectation is that we will see a meaningful drop in the spot [market] in the next couple of weeks,” he said. “So, something’s gotta give; either spot rates drop towards futures, or the opposite takes place.”
The Baltic Exchange’s basket assessment of average capesize spot rates declined on Thursday, dragged down by the transpacific round-trip, which accounts for 25% of the calculation. The capesize 5TC, the weighted-average spot rate across five key routes, fell by $610 to $74,176 per day. The assessment climbed by 22% between last Friday and Wednesday.
In contrast to the Pacific, rates in the Atlantic basin continue to strengthen on the back of short vessel supply. The benchmark rate for transatlantic round voyages from Gibraltar/Hamburg was assessed $2,350 higher on Thursday at $81,800 per day.
In derivatives, paper remains heavily discounted relative to the current capesize spot market, particularly for prompt contracts. Capesize forward freight agreements (FFAs) for September picked up $236 per day on Wednesday and settled at $54,257 per day, Baltic Exchange data showed. The October contract jumped by $875 per day to $61,286 per day on Wednesday.