Asia Dry Bulk, Capesize Rates Set to Diverge

Posted by Joseph Keefe June 16, 2016

Rates from Australia to fall, Brazil rates to nudge higher.

Freight rates for large capesize dry cargo ships on key Asian routes could diverge next week with rates from Australia to China trending lower on weaker sentiment while prices from Brazil to China could rise on tight vessel supply, ship brokers said.

That comes as freight rates slipped on Wednesday from multi-month highs hit on Monday.

"Sentiment in the Pacific is not good. There is still room for rates from Australia to drop further," a Shanghai capesize broker said on Thursday.

Fortescue Metals Group chartered a capesize ship at a rate of $4.70 per tonne on Thursday to haul around 160,000 tonnes of iron ore from Australia to China, brokers said.

That was down from the Baltic index level of $4.83 per tonne for the route on Wednesday.

"There's no hope for the market from Australia," the broker said.

That was despite the Big Three Australian miners - Rio Tinto , BHP Billiton and FMG - actively chartering ships this week.

"It's the end of their financial half year or full year so they are pushing out as much (iron ore) as they can," said a Singapore capesize broker.

"Next week feels a bit softer," the Singapore broker said.

Capesize charter rates for Western Australia-China slipped to $4.83 per tonne on Wednesday from $4.85 per tonne the same day last week. Rates hit $4.98 on June 13, the highest since Nov. 10.

But freight rates from Brazil to China climbed on Thursday because of the limited number of ships for hire.

"Tonnage is very tight from Brazil," the Singapore broker said.

Freight rates were around $9.40 per tonne for a capesize ship for a voyage from Brazil to China on Thursday, up from $9.26 on Wednesday's close, the Singapore broker said.

That would be the highest since early December and up from $9.13 per tonne last Wednesday.

The capesize market is affected by significant overcapacity which is weighing down on rates, ship broker Banchero Costa (Bancosta) said in a report on Wednesday.

The capesize fleet is forecast to grow 2 percent this year in tonnage terms with only marginal growth in iron ore and coal volumes, the main capesize cargoes, the Bancosta report said.

Charter rates for smaller panamax vessels for a north Pacific round-trip voyage fell to $3,794 per day on Wednesday against $3,864 per day a week earlier in what Norwegian ship broker Fearnley said was an over-tonnaged market.

Freight rates in the Far East for smaller supramax vessels were flat at around $5,500 per day this week on stable cargo volumes, brokers said.

The Baltic Exchange's main sea freight index fell to 604 on Wednesday from 610 last week.