Capesize spot rates slid substantially on Tuesday, continuing a downward trend that sector experts are chalking up to seasonality more than anything else.
The weighted time-charter average (TCA) for capesize bulkers has declined 18.8% since Thursday to $20,707 per day, according to Baltic Exchange assessments.
The spot rate for the benchmark Brazil-China round voyage dropped 20% during the same time frame to $15,027 per day.
That for the West Australia-Qingdao leg has also slid markedly, falling 13.7% to $6.914 per metric tonne.
"The fall in capesize spot rates comes as no surprise given seasonal headwinds," Cleaves Securities analyst Joakim Hannisdahl told TradeWinds.
He noted, however, that capesize spot rates for January are 164% higher than a year ago, while Brazilian iron-ore exports have risen 15% over the same period.
Clear skies
"It is peak rainy season, but the skies are clear and exports are moving along nicely," Hannisdahl said of the weather in Brazil.
Tonnage has also been very tight off Brazil, evidenced by Cleaves' satellite data showing an average of 44 capesizes expected to arrive over the next 30 days, he said.
"This is only slightly below the similar 51 average in January 2019, but with exports 15% higher, the tonnage situation has been tight."
Still, seasonality should cause the capesize TCA rate to fall to $17,625 per day on average through the first quarter and then $17,516 per day through the second quarter, he said.
It should rebound to $22,196 per day on average for the third quarter, he said.
"All the aforementioned items can help explain why spot rates have been unusually strong year to date, but with Chinese New Year coming up, we are not surprised that the capesizes are going down," he said.
Atlantic basin rates reaching $30,000 per day and higher, by stark comparison, are still keeping the Baltic Dry Index (BDI) higher than usual for this time of year, Breakwave Advisors founder John Kartsonas said.
The BDI hit 1,659 points on Tuesday, down from 1,765 points on Monday.
"This rarely happens, that you have such differences, but the whole issue with queues and delays in China combined with strong demand from a recovering Europe is keeping this market higher than expected," he told TradeWinds.
Capesize spot rates along the Gibraltar-Hamburg voyage came in at $31,675 per day on Tuesday, down from $34,925 per day on Monday.
Rates for the trip from Mediterranean/Europe to China were also assessed lower, hitting $40,925 per day on Tuesday from $44,650 per day on Monday.
Hard to predict
But the seasonal impact on rates could be anyone's guess in this unprecedented year of Covid-19 disruption, said Rebecca Jones, research analyst at London-based shipbroker Alibra Shipping.
"The BDI and BCI [Baltic Capesize Index] have dropped off somewhat, however, the BDI is almost three times higher than the levels seen during the same period last year," she told TradeWinds.
This year's seasonal effect is hard to predict because China will work somewhat during Lunar New Year holidays to keep workers in place to reduce Covid spread, she said.
China may lift its Australian coal ban but some Chinese coal buyers may have sold the commodity to other markets, Jones said.
"This will increase vessel availability could also have a knock-on effect on the rates," she said.
