05-10-2021 Capesize bulker rates break $80,000 per day amid supply crunch, By Michael Juliano, TradeWinds
Spot rates for capesize bulkers have broken yet another threshold unseen since 2008 in a runaway market that shows no signs of slowing down. The capesize 5TC, a spot-rate average weighted across five routes, jumped 5% on Tuesday to reach $80,877 per day, according to Baltic Exchange data. The last time this rate surpassed $80,000 per day was on 5 September 2008 when it attained $81,362 per day while in a rapid slide to under $2,400 per day just three months later.
“The capesize market is going from strength to strength over the last month with spot rates now at 13-year highs, supported by iron-ore export volumes out of Brazil and Australia to China and strong mineral exports in the Pacific,” said Rebecca Galanopoulos Jones, research analyst for London broking house Alibra Shipping. “A lack of tonnage is also driving freight rates due to port congestion in China along with other Covid-related delays.”
She also noted that one-year time charter rates for capesizes were also up last week to 11-year highs at an average of $32,000 per day. Coal demand is also being cited as a reason behind the rising average capesize spot rates, which have risen by $30,000 per day in less than a month’s time. “Coal is basically the most sought commodity right now, and the energy crisis in Europe is causing a panic mode amongst traders to secure supplies,” a market analyst told TradeWinds.
“It’s a similar situation in China, given their low inventories. Dry bulk historically has been a coal market. Only the last decade iron ore has dominated, but at the end of the day, coal is king.”
The strong capesize market comes as, ore listed bulker owners are paying dividends through variable payouts, which fluctuate based on company performance, according to Noble Capital Markets equities analyst Poe Fratt. “It will be interesting to see how investors view the variability,” he told TradeWinds. “Overall, it is a positive since the dry bulk industry is on more solid financial footing and generating strong cash flow.”
He said dry bulk equities should perform well if capesize rates stay above $40,000 per day and supramax rates maintain at least $30,000 per day. New York-listed owners that are paying dividends include Genco Shipping & Trading, Star Bulk Carriers and Eagle Bulk Shipping, which announced a payout policy on Monday.