Capesize market suffering, dry bulk market takes plunge.
The dry bulk market has lost its upward momentum exhibited during the past couple of weeks and brought the industry"s main sea freight index the Baltic Dry Index (BDI) to a two month high of 3,574 points. After Wednesday"s second falling session, now the index has retreated back at 3,427, mainly as a result of lower capesize rates. The relative Capesize index has lost an aggregate 631 points, now down at 3,780 points. Instead the rest of the pack has been steadily growing, with the panamax market in particular proving rather buoyant. According to a report earlier this week, there were total of 143 capsize vessels waiting to discharge at ports in China, Australia and Brazil against a high of 157 ships in mid January.
Brokers have been attributing the latest shortcomings of the capesize market to excessive volatility of the market, a trend set last year, as a result of the abnormalities in trade flows, caused by the global economic crisis. Most of this volatility is caused by China"s demand for iron ore, with the Asian powerhouse proving more important to the dry bulk market than ever. After all, most analysts seem to admit that there is sufficient cargo demand, at least in the short term, to offer support to the market. But, most are cautious about the looming oversupply of vessels. Moody's Investors Services told Reuters on Tuesday while the worst is over for the shipping industry, the seaborne sector will continue to face oversupply problems which will put pressure on freight rates this year.
According to Fearnley"s latest weekly report, the capesize market started off last week with much uncertainty until Wednesday, when it suddenly rose, mainly due to increased activity in the Far East by the likes of Rio Tinto, BHP and Fortescue. ?However this week, the charterers are inactive and rates dropped to $low 11s pmt. The fronthaul market was improving last week as well, mostly due to the overall sentiment, however number of ballasters and early ships compared to absence of early cargoes have resulted in rates decreased from low $30 pmt to approximately $26 pmt. Apparently, there is still a lot of uncertainty also related to the ongoing price negotiations of iron ore, however there are some signs that iron ore stock piles in PRC are decreasing and more activity is expected for this spring? said the shipbroker.
Commenting on the panamax market, Fearnley"s said that there is still increased activity from ECSA, which has contributed to further strength, with ballasters from the Far East fixing at 33,000 levels for full r/v. ?A lack of tonnage made room for further strength, and front haul from the Atlantic has been fixed from the mid 40k levels even up to mid 50k level for voyage basis Cont. or Black Sea positions. Pac r/v fixed at low 30k and India to China above the very healthy 50k mark. The period market is still active with short period levels typically in the mid 30k range for Far East positions, above 40k for Atlantic positions and very high 20k for one year. Takers are also there still for 2 years at 22k/day. The FFA market has been moving sideways under pressure from the Cape market but holding levels with the firm physical market conditions. It seems the underlying optimism for Q2 is still around supported by the grain market, although under question with an expected reduction in the Coal market and a ratio to the Cape market in the relatively low 1.2 range? Fearnley"s concluded.