darylwilkes
17/12/2009 20:37:28
Posts 451
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Dry bulk shipping market finding some support, as owners take Capesizes off the market
capesize_cargo1234.jpgWith the Baltic Dry Index finally having reached bottom, at least according to market analysts, the dry bulk industry is looking to begin its long road of recovery in terms of hiring rates. After the first glimmer of hope received Friday with the halt of the BDI’s 35 day slide, Monday’s session was again on the positive side. The BDI ended at 1732 points, up by 12, with gains noted both in the capesize and the panamax end of the market. Still, shipbrokers’ reports have warned that demand from China remains subdued, which means that no particular “rally” should be expected in the near term. In its latest weekly report, Commodore Research & Analysis said that “recent spot chartering activity has decreased sharply from moderate levels seen at the start of the month. Two weeks ago, the steady increase in available vessel supply was largely responsible for the continued decline in freight rates. Last week’s decrease in freight rates, however, was largely due to the recent decline in spot cargo demand. A sharp week-on-week decrease in iron ore fixtures put additional pressure on capesize rates - but owners have reportedly begun to take their Capes out of the market in order to artificially reduce vessel supply, which would help capesize rates find support. This ploy might be working - capesize rates increased by 3.5% on Friday, after previously falling for 11 consecutive days and during much of June.
Panamax freight rates have also been finally able to find support. A moderate amount of South American grain fixtures and Indonesian and Australian coal fixtures continue
to come to the market, which have led to a moderate increase in panamax rates. Also
encouraging is last week’s minuscule week-on-week decrease in Chinese steel prices.
Chinese steel prices need to reverse their decline before a sustained increase in freight rates is possible” said Commodore.
Port congestion still affect shipping rates, with approximately 155 vessels currently anchored outside major Australian ports, 10 more than a week ago. Approximately 40 vessels are anchored outside major Brazilian ports, 10 less than a week ago. Of the 195 vessels congested outside of the Australian and Brazilian ports, approximately 100 of them are Capesize vessels. In comparison, 110 Capesize vessels were anchored outside of Australian and Brazilian ports a week ago. Lower levels of global vessel congestion continue to put pressure on freight rates. Rates have come under additional pressure due to the recent decline in cargo demand.
According to Commodore, “although cargo demand has seen a noticeable week-on-week decline, owners are reportedly taking their vessels out of the market which might help rates find support”. Meanwhile, the report said that Chinese steel exports have possibly peaked. “China has exported 23.58 million tons of steel in the first six months of 2010, 14.25mt (153%) more than the 9.33mt exported during the same period in 2009. This increase in seaborne cargo has helped support rates for smaller dry bulk vessels. Chinese steel exports are about to come under pressure, however, even though global steel demand remains robust. Recently passed legislation which removes rebates for Chinese steel mills on various types of steel exports came into effect on July 15. Chinese steel exports totaled 5.62mt in June, the largest total since September 2008, but Chinese steel exports are now, on average, 10% more expensive than just 4 days ago. Chinese steel exports are now likely to begin coming under pressure” Commodore said.
As for coal trades, more thermal coal will likely be used by China, to fuel any increase in power generation, with the country’s hydropower output likely at or near its peak. As a result, Chinese thermal coal imports, which have been robust but on the decline since April, could find additional support. Commodore mentioned that in recent weeks, a moderate amount of Chinese thermal coal fixtures have been chartered in the dry bulk market and fixtures may increase in the upcoming weeks. It still remains to be seen if China will be able to generate enough electricity to satisfy growing demand.
More at Hellenic News
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