17-03-2017

Dry bulk: Capesize freight rates hit multi-month highs on tonnage tightness

Capesize

Capesize freight rates on the key Brazil-China and South Africa-China iron ore routes hit multi-month highs Wednesday as the availability of ballasters failed to keep pace with robust cargo demand.

The front-haul iron ore route from Tubarao in Brazil to Qingdao in China hit a 19-month high Wednesday amid a shortage of vessels in the Atlantic for the late March-early April loading window.

The Capesize Tubarao-Qingdao 170,000 mt (plus/minus 10%) route was assessed at $15.75/wmt Wednesday, the highest since August 6, 2015, when it hit $16.40/wmt.

The Saldanha Bay-Qingdao 170,000 mt (plus/minus 10%) route was assessed at $12.00/wmt Wednesday, the highest since December 3, 2014, when it hit $12.25/wmt.

Another key iron ore route, from Port Hedland in Western Australia to Qingdao for 170,000 mt (plus/minus 10%), was assessed at a year-to-date high of $6.65/wmt Wednesday.

A strong rally in the freight derivatives market was adding to the booming sentiment.

Market participants attributed the firmness to a reduction in the number of ballasters into the Atlantic region due to weak freight levels in February, which resulted in owners not being keen to fix vessels for long voyages at rates that, at the time, offered poor returns.

The TCE rate on the Tubarao-Qingdao route was assessed at $16,581/day Wednesday, up six-fold from a year-to-date low of $2,664/day on February 16.

The TCE for the Saldanha Bay-Qingdao route was assessed at $17,622/day and for the Port Hedland-Qingdao at $15,038/day, both the highest since S&P Global Platts began publishing TCE assessments January 3.

Changing market dynamics were also playing a part.

“I would say [there is a] totally different market for iron ore and coal now compared [with] a year ago. We have seen record high volumes going from Australia to China over the last few months, largely due to the cuts in Chinese domestic coal production,” said Banchero Costa research director Ralph Leszczynski, who noted global coal prices had surged 53% year on year on the back of rising Chinese import demand.

“The Chinese economy is significantly more active than a year ago. In part this is also because 2017 is an election year in China… Authorities will be keen to stimulate the economy and show the economic situation is healthy this year,” he said.

The stronger fundamentals in China have also boosted other segments of the dry bulk freight market since the start of 2017, with rates across the board seen at healthy levels.

Source: Platts 

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