Demand, Bunker Pricing Spurs Asia Dry Bulk-Capesize Rates

Posted by Joseph Keefe June 30, 2016

Owners asking $1 per tonne more on Australia-China rates; Panamax rates climb to two-month high, but remain under pressure.

Freight rates for large capesize dry cargo ships on key Asian routes could continue to firm next week on higher cargo volumes and bunker prices, while upbeat shipowner sentiment will also support the market, ship brokers said.

"The market is pushing up a little bit. Owners' ideas though are even higher - they are indicating about $1 per tonne more on rates from eastern Australia," a Shanghai-based capesize ship broker said on Thursday.

"Sentiment is more positive now than at the beginning of the week," the broker said.

Higher bunker prices <FO380-SIN>, which climbed to an eight-month high on Wednesday, together with a jump in forward cargo contract prices and an expected increase in the number of cargo fixtures raised sentiment among owners, the broker said.

"We now see owners are encouraged to make higher rate indications," the broker said.

"I think it will stay firm for the next one or two weeks," the broker added.

While major miners including Rio Tinto and Vale were active, most of the charters concluded this week were done by vessel operators such as Oldendorff Carriers and traders like Cargill, chartering data on the Reuters Eikon terminal showed.

Norwegian ship broker Fearnley said charters for "quite a bit of cargo" have yet to be concluded for loading at the end of July, "so it is expected that the rates will keep firming".

Capesize charter rates for Western Australia-China rose to $4.51 per tonne on Wednesday, the highest since June 17, against $4.33 per tonne last week.

Freight rates from Brazil to China climbed to $9.37 per tonne on Wednesday, the highest since Dec. 2. That compared with $8.99 per tonne on the same day last week.

Charter rates for smaller panamax vessels for a north Pacific round-trip voyage jumped to $5,153 per day on Wednesday, up from $4,167 per day a week earlier, on strong cargo volumes. That was the highest since April 27.

"(Panamax) rates are still under pressure given the existing fleet oversupply and decline in coal trades," ship broker Banchero Costa said in a panamax market report on Wednesday.

"However, strong levels of vessel demolition, combined with delays and cancellations at shipyards, mean that net fleet growth will slow down to zero this year. The current drought in orders gives us hope that the market could finally start rebalancing," the report added.

Freight rates in the Far East for smaller supramax vessels climbed to about $6,500-$7,000 per day this week on more cargo, although chartering activity is slowing, brokers said.

The Baltic Exchange's main sea freight index rose to 640 on Wednesday from 585 last week.