Asia Dry Bulk-Capesize Steady as Owners Spurn Low Rates

Posted by Joseph Keefe July 28, 2016

Owners anchoring ships rather than fix at low rates. W. Australia-China capesize rates hit over two-month low.

Freight rates for large capesize dry cargo ships on key Asian routes are likely to hold steady as ship owners resist charterers' attempts to push rates lower amid a dearth of cargo, ship brokers said.

"We are reaching a floor, particularly in the Pacific. It's got to the point where owners just won't fix their ships," a Singapore-based capesize broker said on Thursday.

"Charterers are seeing a bit of resistance - owners are anchoring ships," the broker added.

That came as spot charter freight rates for an 180,000-deadweight tonne capesize vessel slipped below $4 per tonne for a voyage from Western Australia to China on Wednesday. That is the lowest since mid-May.

"Rates are moving down slowly. The market is very quiet and cool," a Shanghai capesize broker said on Thursday.

"There are very few fixtures - I think it will last the same way for a while," the broker said.

There were 18 reported capesize spot fixtures in the week to July 26, according to data on the Reuters Eikon terminal, compared with 20-25 in previous weeks.

"There are so many ships and not enough cargo volume," the Singapore broker said.

Only Rio Tinto was active among the Big Three Australian miners this week, brokers said.

Daily time charter equivalent earnings have fallen to about $3,500 for a voyage from Australia to China and about $5,500 from Brazil to China, brokers said.

That compared with daily operating costs of around $7,300, according to accountancy firm Moore Stephens.

Higher daily earnings from Brazil have encouraged owners to sail vessels empty on the expectation rates with be stronger when ships arrive off the South American coast in August and September, the Singapore broker said.

Capesize charter rates for Western Australia-China fell to $3.95 per tonne on Wednesday, down from $4.20 a tonne a week earlier, the lowest since May 13. Brokers said rates were trending lower at $3.85 per tonne on Thursday.

Freight rates from Brazil to China dropped to $8.73 per tonne on Wednesday against $9.04 per tonne the same day last week.

Charter rates for smaller panamax vessels for a North Pacific round-trip voyage were down to $6,120 per day on Wednesday, from $6,938 per day last Wednesday, the lowest since July 12.

North Pacific panamax rates are set to drop further as charter rates on other panamax routes also slide, Norwegian ship broker Fearnley said in a note on Wednesday.

Charter rates for supramax vessels, which hit $8,000 per day last week for coal cargos to India and China are cooling as owners prefer to keep ships in the Atlantic, brokers Fearnley and Banchero Costa said.

The Baltic Exchange's main sea freight index fell to 679 on Wednesday, from 736 last week.