Panamaxes eclipse capesize rates
Gradual build-up of demand supports steady climb in values
Charter rates for panamax bulk carriers have overtaken capesize hire prices for the first time since the shipping markets collapsed 18 months ago.
The Baltic Exchange"s average panamax time charter rate climbed on Friday to $34,906 per day, up more than $1,500 on the capesize average of $32,157 per day.
?Despite the apparent discrepancy between panamax and capesize rates, the steadiness of rates in smaller segments is supportive in terms of underlying demand,? Norwegian investment bank Arctic Securities wrote in its daily report.
?Volatility in the capesize market over the past months has been driven primarily by uncertainties around iron ore contract negotiations.?
When the Baltic Dry Index reached an 18-month high of 4,661 points back in late November 2009, this was on the back of booming demand for capesizes delivering vast quantities of iron ore to China. Although it did help support sentiment in the panamax, supramax and handysize markets, none of them had the same acceleration that saw the average capesize charter rate more than double in one month alone to reach $90,000 per day.
This time around, the smaller sizes appear unaffected by what is happening in the capesize market and a gradual build-up of demand combined with congestion at Australian panamax coal loading ports has supported a steady climb in spot market rates.
Simpson Spence & Young"s Australian Coal Port Congestion Index showed average delays off the east coast had risen above 18 days for the first time since 2007, the London broker"s monthly report said. This ties up vessels, leaving fewer panamaxes available in the spot market.
?Smaller ships have benefited from the general improvement in economic conditions, with rising world steel prices continuing to indicate strengthening levels of demand,? SSY added.
Physical brokers of panamax tonnage have also expressed frustration at the fluctuating freight derivatives market and how it is creating confusion among owners and charterers as many looked to the paper market as an indicator as to whether they should book period charters.
In the capesize market, owners were understood to not be committing tonnage even on short-term contracts as many thought the physical market was set to boom again in a couple of months and did not want to tie up vessels at low market levels.
This supported patterns seen in the FFA market last week. Although down from the $41,000 per day range paid on March 12, April contracts and second quarter contracts for capesizes were both trading above the current spot market rate, at $37,000 per day, according to Freight Investor Services.
Paper traders did not appear so confident that the panamax market would sustain current market levels, with April contracts trading at an average of $33,875 on Friday, and second quarter contract values averaging $31,000 per day, FIS data showed. Values then dropped off further for panamax third-quarter contracts, which averaged $24,500 per day. FIS figures showed capesize third-quarter contracts trading at around $31,500 per day.