Star Bulk Carriers is expecting capesize rates to rise over the next half year, driven by a frenzy of scrubber installations before the IMO 2020 deadline.
Rates rebounded from $3,460 per day in early April to flirting with $33,000 per day two weeks ago before dropping to $23,872 per day today as tonnage returned to the Atlantic basin.
"We’re very positive about the cape size market at least until the end of this year, with the market got as strong as it did because there were very few capes in the Atlantic for various reasons," chief executive Petros Pappas said today during a second-quarter earnings call.
He said capesizes were focused on the Pacific basin once Vale's Brucutu mine returned 30 million metric tonnes of iron ore to the market, bunker prices got pretty high and many ships were drydocked for scrubber retrofits.
"The Chinese yards are very, very busy with all these vessels, dry dock times and scrubber installation times are getting longer," he said.
"So I would not be surprised to see vessels of companies that have not been extremely well prepared and have not fixed forward staying in shipyards for like 60 days.
More scrubber retrofits needed
That will take a lot of capes off the market for the next five months, given about 60 VLOCs and 130 capes still need scrubbers, he said.
"Since yesterday, the market went up by $2,000," he said.
"So in our view, it's going to be a strong market with ups and downs, but I expect them to be above $20,000 for the near future."
At the same time, China will soon return to the market for more iron ore because the country let its stockpile fall down to about 120 million tonnes, he said.
"We believe that this slowdown in demand in Chinese imports was more supply driven than demand driven," he said.
Slow-steaming to counter high low-sulphur fuel costs also bump up rates by lowering ship supply to charterers, he said.
"Diesel oil at $700 per ton it is almost certain that they will slow down the speed," he said.
"And as we have said before again, 1 knot decrease in speed equals about 7% decrease in supply of vessels, which is huge."
