Spot rates across dry bulk shipping on Thursday continued a steady ascent in a sector that has been quite volatile for some time.
The Baltic Dry Index has been on a rollercoaster ride since 1 April, improving 58% to 3,266 points on 5 May before sliding 26% to 2,420 points on 8 June.
Since then, it has rebounded 35% to 3,267 points on Thursday.
The capesize 5TC, a spot-rate average across five routes, has taken similar ups and downs since 1 April, rising 126% to $44,817 per day on 5 May before dropping 56% to $19,845 per day on 8 June.
Since then, it has gone up 76% to $34,930 per day on Thursday, according to the Baltic Exchange.
"Well, as we have been saying since last year, volatility is here to stay," John Kartsonas, founder of asset-management advisory firm Breakwave Advisors, told TradeWinds.
"I don’t foresee any easing on ups and downs, as there is a constant battle between the strong fundamentals and the very elevated levels on futures that makes people nervous."
He said the dry bulk market is "due for a breather" as future and spot rates slowly converge towards more rational levels.
"I don’t expect it to be meaningful for shipping standards, but it could look like a decent correction here," he said.
China's strategic efforts
Sevi Katemoglou, shipbroker and founder of Greek broking house EastGate Shipping, gave a contrarian view, saying that the outlook for capesize rates appears positive for the rest of 2021.
"Although it is indeed challenging to gauge the exact impact China’s strategic efforts can have in the demand of key commodities, we don’t expect them to prove materially important," she told TradeWinds.
She said strong Chinese demand and high iron ore prices may cause capesize freight rates to spike in the coming weeks. They have jumped 38% since 8 June to $29.65 per tonne on Thursday.
"If this materialises, it would indeed place capes back at the top of the freight earnings pyramid ladder, as the economies of scale mandate," she said.
Rates for panamax bulkers and smaller ships may also stay elevated amid China's demand for grains and coal, but dry weather in South America and the US could hurt grain volumes, she said.
The panamax 5TC edged up 3% on Thursday to reach $31,671 per day.
But Kartsonas said there is still enough uncertainty throughout dry bulk shipping to cause the paper market to fall slightly since Wednesday.
The June forward freight agreement rate for capesizes slipped 2% to $30,250 per day, while that for panamaxes declined 6% to $29,000 per day.
"This is perfectly fine. Rates are a volatile asset class, and much more volatile than other sectors," he said.
