Asia Dry Bulk-Capesize Rates Flat as Rally Fades

Posted by Joseph Keefe March 10, 2016

Higher fuel prices could help lift freight rates - Shanghai broker.

Freight rates for capesize bulk carriers on key Asian routes are likely to hold around the current levels, after a revival in charter rates this week ran out of steam as the fundamentals of too many ships chasing little cargo remained unchanged, ship brokers said.

"Next week is going to be flat," said a Shanghai-based capesize broker on Thursday.

"But bunker prices might give some support for owners to push the market up. So we might see a little improvement in the rates," the broker said.

Capesize freight rates from Western Australia to China hit a three-week high on Tuesday after Hong Kong-headquartered ship operator and commodities trader Caravel chartered the 207,591 deadweight tonne (dwt) ore carrier Seaforce at a rate of $3.09 per tonne for a voyage to Qingdao.

Rates were supported by higher ship fuel prices and a near 20-percent surge in iron ore prices, which climbed to a nine-month high on Tuesday, ship brokers said.

Singapore prices for 380-centistoke high sulphur bunker fuel <FO380-SIN> hit a three-month high this week.

Ship owners trading vessels on the spot charter market pay their own fuel bills so higher bunker prices help support freight rates.

However, capesize freight rates are still range-bound even though a number of ships being idled and scrapped has increased.

More than 60 capesize vessels have been idled and around 5.5 million dwt has been sold for scrap this year because of the poor market conditions, ship brokers said.

Capesize charter rates for the Western Australia-China route were lower at $2.99 a tonne on Wednesday, against $3 per tonne a week earlier.

Rates for the Brazil-China route rose to $5.53 a tonne on Wednesday, the highest since Feb. 29, as compared with $5.45 per tonne the same day last week.

Freight rates from Brazil were buoyed by several charters by Vale.

"We could see Brazil-China rates firm up slightly - it all depends on Vale fixtures for April (loading)," a Singapore-based capesize broker said on Thursday.

Panamax rates for a North Pacific round-trip voyage rose to $4,437 per day on Wednesday, up from $3,387 per day last week. That is the highest since Nov. 4.

Pacific panamax rates were supported by higher charter volumes and tighter tonnage in other panamax markets, including grain cargoes from the east coast of South America, Norwegian ship broker Fearnley said in a note on Wednesday.

Freight rates for smaller supramax vessels were firmer on "good" cargo volumes, Fearnley said.

The Baltic Exchange's main sea freight index rose to 376 on Wednesday, up from 335 last week, and was expected to rise to 398, Reuters technical analysis showed.