Asia Dry Bulk-Capesize Rates Could Soften

Maritime Activity Reports, Inc.

July 30, 2015

Capesize market "overheated" as rates near eight-month highs; optimism for a busier fourth quarter looms.

Freight rates for capesize bulk carriers are likely to take a breather and drift lower after climbing to their highest level in nearly eight months this week following bad weather delays and charterers' need for urgent tonnage, ship brokers said.

"It's been really hot. Both the Atlantic and the Pacific have become overheated. That's why I think it will be bit of a quiet week," said a Shanghai-based capesize broker.

"Owners are pushing for more than $16 per tonne from Brazil to China, while charterers are offering $14 per tonne. There is a nice $2 spread which means nothing will be done while both sides reassess the market," said a Singapore-based capesize broker.

"I think it will be soften a bit," the Singapore broker said.

Freight rates from Brazil to China rose more than $1 per tonne in the week as charterers fixed vessels for early and mid-August loading, Reuters data showed.

This need for prompt tonnage had been caused by bad weather delays, the Shanghai broker said.

"There's still optimism that quarter four will be busier, but there are lower rate expectations" with daily rates forecast between $15,0000-$20,000, the broker added.

Iron ore exports from Brazil and China could climb by more than 78 million tonnes in the second half, said Jeffrey Landsberg, managing director of U.S. maritime consultant Commodore Research & Consultancy in a note this week.

"We remain bullish for capesize rates in Q3 and Q4," he said.

But the Shanghai broker said operators are not so optimistic.

Charter rates for the Western Australia-China route were around $6.40 per tonne on Wednesday, compared with $5.98 per tonne last week and the highest since Dec. 3.

Rates for the Brazil-China route climbed to $16 per tonne on Wednesday, up from $14.75 per tonne a week earlier, and the highest since Dec. 4.

Freight rates for smaller panamax vessels are likely to fall next week on reduced cargo volumes and increased tonnage availability, a Singapore-based panamax ship broker said on Thursday.

Rates for a transpacific voyage dropped to $7,183 per day on Wednesday, against $8,192 per day a week earlier.

Freight rates for smaller supramax vessels slipped this week, Norwegian ship broker Fearnley said in a note on Wednesday.

The Baltic Exchange's main sea freight index fell to 1,104 on Wednesday, compared with 1,118 a week earlier, and may hover around 1,112 or retrace towards 997, technical analysis shows.

Reporting by Keith Wallis

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