Capesize Rates Bounce Back

Tuesday, February 20, 2001
Freight rates for Capesize bulk carriers are bouncing back from a 15-week dive, as Japanese steel producers rush for ships to carry coal and iron ore cargoes bought at last year's prices. "Japanese buyers would have taken contracts for 2000 with options for additional cargoes of iron ore and coking coal," said one London broker. "Now it's the fiscal year end, and they appear to be declaring all those options." "The sudden rush for ships to carry those cargoes has put upwards pressure on freight rates," he added. He said producers of iron ore and buyers were miles apart in negotiations over 2001 contracts. London shipbroker SSY's Capesize Index showed a sudden reversal in the direction of rates, with the Atlantic Index gaining 75 points in the week ending Monday to reach 4,498. "The index shows something of a bounce this week, with the return of growth to freight rates occurring on almost exactly the same day as last year," said SSY. It observed the recurrence of this bounce every February for the last three years. Freight rates on the benchmark coal route of Richards Bay to Rotterdam rose to $8.55 per ton, compared with $8.37 last week, said London's Baltic Exchange. "Imminent commodity price rises are often the cause of market improvements... The rise has certainly not been spectacular, but it has arrested the slashing of rates," said SSY. David Price of McCloskey's Coal Report said demand for ships was likely to increase. "The Japanese fiscal year negotiations always lead to a hiatus, but an agreement is just about there and we should see a surge in March," he said. SS&Y tempered its assessment with warnings of future uncertainty. "We await to see the fortunes of the steel industry before judging the direction of freight rates over coming months," it said. - (Reuters)

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