Asia Dry Bulk-Capesize Rates to Climb Again

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Posted by Joseph Keefe

Number of spot capesize cargoes double from January
levels; Pacific capesize earnings now around $14,000 per
day.

Freight rates for large capesize dry cargo vessels on key Asian
routes, which hit multi-month highs this week, are set to jump
further next week on tight tonnage supply and buoyant cargo
volumes, brokers said.

Rates on the capesize route from Brazil to China soared to the
highest level in nearly 18 months on Thursday, fuelled by
chartering activity by Brazilian iron ore major Vale and ship
operators including Louis Dreyfus, according to ship brokers and
chartering data on the Reuters Eikon terminal.

"I think we'll see rates continue to go up. The supply of tonnage
for April loading is very tight. Tonnage is tight generally," a
Singapore-based capesize broker said.

"It has been a surprise - rates increased further than we
thought," the broker added.

That came as the number of spot capesize charters, mainly to
transport iron ore, surged to more than 40 in the week ended
Thursday, which is double compared with January level, data on
the Reuters Eikon terminal showed.

Earnings are now around $14,000 per day for a capesize round-trip
voyage in the Pacific Ocean, Norwegian ship broker Fearnley said
in a note on Wednesday.

That compared with average daily earnings of $6,500 last year,
according to data from shipping services firm Clarkson.

But analysts sounded warnings on the outlook for the dry bulk
market.

"The continued slowdown in scrapping and the lower level of
demand in the first quarter, means the supply-side growth will
exceed the growth in demand on a short-term basis, and lead to
lower dry bulk earnings in that period," Peter Sand, chief
shipping analyst at shipping lobby group BIMCO, stated in a note
on Thursday.

High iron ore prices could prompt Chinese domestic producers to
re-open shuttered mines, which could compete with imports, said
Ralph Leszczynski, head of research as shipbroker Banchero Costa
in Singapore.

Charter rates from Western Australia to China route rose to $6.35
a tonne on Thursday, from $5.99 per tonne a week earlier. They
hit $6.49 per tonne on Tuesday, the highest since Nov. 29.

Freight rates for the route from Brazil to China climbed to
$14.52 per tonne on Thursday, the highest since Sept. 21, 2015,
from $11.42 per tonne the same day last week.

Charter rates for smaller panamax vessels for a north Pacific
round-trip voyage continued to surge, rising to $10,390 per day
on Thurday, the highest since Nov. 11, 2014, from $9,170 per day
last Thursday.

Rates in the Far East for supramax vessels rose to
$12,000-$13,000 per day for trips from South East Asia to China
this week, from around $10,500 per day last week.

The Baltic Exchange's main sea freight index climbed to 1064 on
Thursday from 904 last week.

Reporting by Keith Wallis

Mar 10, 2017

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