Spot rates for capesize bulkers fell considerably over the past week amid rising prices for iron ore and steel.
The capesize 5TC, a weighted average of spot rates on five key routes, has decreased 16.8% from last Friday to $34,542 per day, according to the Baltic Exchange.
Iron ore is up to $211 per tonne while steel hit $230 per tonne earlier in the week, prices that have prompted Chinese builders to slow down on buying building materials, Reuters has reported.
The decline may be just a correction, however, from a recent rally in average capesize rates that went as high as $44,817 per day on 5 May, said John Kartsonas, founder and managing partner of asset management advisory Breakwave Advisors.
"It's worrisome that China is becoming more serious about commodity prices, and rightfully so, but I don’t think this is the reason for the correction," he told TradeWinds.
"It was due in any case, but sentiment-wise it is definitely not positive."
Kartsonas said he expects that capesize rates will fall a little further but then head back up by mid-June, given the cyclical nature of shipping.
"We have been saying for quite a while now that 2021 will be a very volatile year for dry bulk," he said.
"We experienced the ascent in rates and now it is time for rates to move the other way. We will bottom and come back up.
All about timing
"Timing is tough to pinpoint, but I am hopeful for a summer rally."
According to analysts at the Baltic Exchange, only time will tell.
"How the market reacts next week will surely dictate whether this is a flash crash, possible buying dip or something more severe," they said in their weekly wrap-up on the capesize sector.
"The capesize major cargo, iron ore, has been on a tear this week reaching the $220-$230 per tonne, which may help to underpin owners’ optimism for strong demand for their vessels in the weeks ahead."
Panamax spot rates also declined over the past few days, but not to the extent that capesize spot rates did.
The panamax 5TC, which covers spot rates on five routes, reached $27,740 per day on Wednesday before slipping to $26,625 per day on Friday.
Those for supramaxes and handysizes remained firm amid tight supply.
The supramax 10TC gained $106 per day over the week to reach $25,264 per day by Friday. The handysize 10TC rose $440 to $22,839 per day over the same period.
