01-10-2021 Capesize bulkers rates continue to soar amid supply-chain ‘mess’, By Michael Juliano , TradeWinds
Spot rates for capesize bulkers continue to reach new heights as demand for iron ore and coal put a huge strain on the commodities supply chain, market experts said. The capesize 5TC, a spot-rate average weighted across five key routes, logged a one-week gain of 23% to reach $75,190 per day on Friday, according to Baltic Exchange data. “The more one looks at the current situation in shipping, the more it seems like a bigger issue than just dry bulk supply and demand,” John Kartsonas, founder of asset-management firm Breakwave Advisors, told TradeWinds. “The global logistical chain is a mess, for various reasons, and that affects a number of industries including dry bulk.” He said the constraints will most likely persist and make for very volatile rates over the winter that will be difficult to analyze. “Any correction would not be fundamentally driven, and I do not expect to last long,” he said. “Weather will be the primary driver this winter, and we could be in for a lot of surprises.”
Baltic Exchange data on Friday showed capesize bulkers fixed for Brazil-to-China journeys at $47 per tonne of iron ore, compared to $38 per tonne a week earlier. For voyages from Western Australia to Dampier, Rio Tinto fixed an unnamed 170,000-dwt bulker at $22.10 per tonne, though the deal was done on Thursday. The mining giant paid $19.40 per tonne for a similar fixture a week earlier.
Capesize rates have skyrocketed amid tight supply and demand, port congestion and bad weather, but they may become unpredictable if they keep climbing, according to Sevi Katemoglou, founder of broking house Eastgate Shipping. “What we know is that supply/demand fundamentals remain in place and suggestive of a strong market which has legs, also backed by a strong forward curve,” she told TradeWinds. “However, China’s current power supply crisis and electricity shortages have led to constrained output from many industry sectors, including production of steel mills, which can have a negative impact on seaborne demand for iron ore.” The forward-freight agreement (FFA) rate for October came in at $61,750 per day on Thursday after picking up $464 per day. The FFA figure for January contracts fell $530 to $29,082 per day. China’s plans to lower steel output as part of its carbon-reduction goals may further propel capesize rates into correction territory over the next two months, she said. “This is not to say that capesizes won’t achieve healthy profit margins still, as we believe they will indeed cruise at a profitable level for a while, but it does raise a question as to whether this extravagant market is indeed sustainable.”
Amid the surging market, Diana Shipping said on Friday it fixed the 177,243-dwt Baltimore (built 2005) at $56,000 per day for a three-month charter that began on 28 September. Baltic Exchange data shows that the vessel was chartered by agricultural firm Olam for a China-to-Brazil round voyage. The Greek shipowner, who expects to make $5.04m in revenue off the fixture, had previously chartered the ship to Koch Shipping for 14 months to the end of July at $13,000 per day.