Asia Dry Bulk-Capesize Market 'Imploding'

Capesize rates fall to six-year lows; rates below ship operating costs, according to accountancy firm.

Rates for capesize bulk carriers on key Asian routes, which crashed close to six-year lows on Wednesday, will continue their inexorable fall in the face of few fresh cargoes, brokers said.

"The market is not very pretty. I've never seen it this low in my time. There is absolutely nothing happening," one Singapore-based capesize broker said on Thursday.

"Capesizes are a disaster," a Hong Kong owner of dry bulk ships including capesize vessels told Reuters on Thursday.

Capesize spot rates from Australia to China are down to the equivalent to $5,500 per day, below the daily cost of operating a 180,000 dwt (deadweight tonne) capesize ship, the Singapore ship broker said.

Daily operating costs, including crew wages, repairs and insurance, for a capesize iron ore and coal carrier are around $7,300 per day, according to accountancy firm Moore Stephens.

Rates have fallen due to a lack of iron ore cargoes from Brazil and coal from South Africa. There have been limited cargoes from Australia, the Singapore broker said.

Rio Tinto was the only major miner actively chartering capesize ships this week, according to Reuters freight data.

"There is no sign of a rebound. The market keeps coming off," the broker said.

The capesize market is "imploding on a close to total absence of prompt demand," Norwegian ship broker Fearnley said in a weekly note on Wednesday.

Freight rates for the Western Australia-China route were at $5.67 per tonne on Wednesday, the lowest since January 2009, and down from $6.79 a week earlier.

Rates for the Brazil-China route were also at their lowest since January 2009 on Wednesday, closing at $15.18 per tonne against $16.72 a week earlier.

Rates in the smaller panamax market will also continue to slide next week as the number of ships available for charter outpaces the volume of new cargoes, a Singapore-based panamax broker said on Thursday.

"I think it will steadily soften over the next week. We are still seeing a lot of tonnage available," he said.

Daily rates for a panamax transpacific voyage fell to $7,341 per day on Wednesday, down from $8,263 per day last week. This is the lowest level since Oct. 1.

Freight rates for smaller supramax bulk carriers rose to around $13,000 per day, up from $12,000 per day, for voyages from Indonesia to India, Fearnley said in its weekly note.

The Baltic Exchange's main sea freight index closed at 911 on Wednesday, down from 1,079 last week.
 

By Keith Wallis