Everything had been going so well. But the correction in the capesize spot market continued on Thursday, with average day rates falling back below $30,000 after a three-day rout.
Momentum has slowed particularly in the Atlantic market and no new voyage fixtures have been reported in the basin since last week, leaving the market without much clarity on pricing.
Baltic Exchange panellists assessed the capesize 5TC rate — the weighted average of spot rates across five key routes — almost 13% lower on Thursday at $28,840 per day.
“It’s difficult to pin this crash on a single factor. However, the strength of the recent rally warranted a technical pullback,” Arrow Shipbroking Group research analyst Harry Grimes told TradeWinds.
“The medium-term supply/demand dynamics are largely unchanged over the past week, and remain positive.”
Rates for round voyages in the Pacific have declined by 20% over the past five trading days due to the number of early ballasters arriving in Australia, shipbroker Fearnleys said in a research note on Thursday.
Transpacific round voyages were assessed $4,794 lower on Thursday at $26,188 per day.
“Transatlantic trades have fared better in comparison, with limited tonnage supply combined with substantial base commodity volumes to move, pushing daily earnings up some 15% to approach $29,000 [per day],” Fearnleys' research team said.
“Fronthaul iron ore trades still deliver well below expectations.”
Round voyages in the Atlantic were assessed $3,211 lower on Thursday at $25,400 per day.
Benchmark assessments for iron ore from Brazil going to Europe and China were respectively assessed more than $1 per tonne lower than on Wednesday.
The key Brazil-to-China route was assessed at $35.30 per tonne, down by $1.22.
China and sentiment
Sentiment in the capesize market has taken a hit due to China's increasingly challenging economic outlook, according to Ulf Bergman, senior economist and quantitative analyst for data platform Shipfix.
“With the latest round of downgrades to the projections for the year, most economists now expect the Chinese growth to fall well short of the official target of 5.5%,” Bergman told TradeWinds. “The Chinese Premier also suggested yesterday that the Chinese economy is in worse shape now than in 2020 and that more efforts are required to keep second-quarter growth in positive territory.”
China has released a 33-point plan to stimulate its economy, but this has failed to excite most observers, he added, and widespread Covid outbreaks mean there is “precious little to suggest that the Chinese will rebound strongly anytime soon”.
“If anything, the longer the Zero Covid policy is enacted, the more likely it is that we will see another round of downgrades to the growth projections,” Bergman said.
Prices for commodities such as iron ore and other metals like copper and aluminium have dipped in recent days due to a weaker demand outlook, he added.
Shipfix data shows that there is the possibility of continued weakness in the capesize market.
Cargo order data for the capesize segment shows that aggregate volumes globally are well below what has been seen for the same period in previous years.
“Our data also highlighted a pickup in tonnage supply earlier this week,” Bergman said.
Chinese port congestion has fallen drastically this week, with the number of vessels waiting outside Chinese coal discharge ports falling to 16, the lowest level since records began in 2015, according to data cited by Clarksons Platou Securities.
Congestion outside iron ore discharge ports in China fell to 46 vessels this week, down from 80 vessels a month ago, the firm said.
The market dip has prompted “major takers” to move their focus to period deals, Fearnleys' research team said on Thursday.
Forward rate expectations are “contango or close”, the note said.
Fearnleys pointed to the fact a 179,000-dwt capesize built in 2013 was fixed for almost two years at $31,000 per day. This vessel is presumably Diana Shipping’s 179,134-dwt PS Palios (built 2013), which on 23 May was fixed to George Economou-controlled Classic Maritime at $31,000 per day for at least 22 months.
Fearnleys quoted $26,000 per day for a five-year period contract for a 181,000-dwt bulker built in 2016.