Dry bulk shipping ended the week on a high, as spot rates across all sectors rose due to capesize earnings being pushed up by those of smaller asset classes.
The Baltic Dry Index (BDI) increased 188 points to 2,857 on Friday, which represented a 17.2% gain from a week earlier.
This came as the capesize 5TC, a spot-rate average weighed across five routes, jumped $3,713 to hit $27,752 per day on Friday — a 32.6% surge compared with the prior week.
But market watchers tied the capesize gain to strong sentiment in still surging smaller bulker classes.
| 11 June | 4 June | Weekly gain | |
| BDI | 2,857 | 2,438 | 17.2% |
| Capesize 5TC | $27,752 | $20,933 | 32.6% |
| Panamax 5TC | $29,718 | $26,400 | 12.6% |
| Supramax 10TC | $28,514 | $26,941 | 5.8% |
| Handysize 7TC | $24,495 | $24,065 | 1.8% |
Rates in dollars per day. Source: Baltic Exchange
"It is not a rare occurrence to see rates going up across the board," Sevi Katemoglou, shipbroker and founder of Greek broking house Eastgate Shipping, told TradeWinds.
She said the dry bulk market is most likely getting boosted by rising spot rates for the sub-capesize assets, which are in demand to carry grains and coal.
"We have seen this pattern repeated quite often, especially since the virus outbreak at the beginning of last year when industrial activity came to a halt, but the pigs in China still had to be fed somehow," she said.
Capesize spot rates are benefiting from "surging" iron-ore prices, to near $200 per tonne, that boost exports, despite China's plans to lower steel output for the environment's sake, she said.
"Prices have not quite disciplined to China’s warnings and iron-ore demand doesn’t seem to have abated," she said.
"On Monday, China will be closed for the Dragon Boat festival, so we expect a slow start to next week."
Lifting all boats
On Friday, the panamax 5TC picked up $882 to reach $29,718 per day, representing a 12.6% improvement form a week earlier, according to data from the Baltic Exchange.
The supramax 10TC added $442 to come in at $28,514 per day, which was a 5.8% jump from seven days earlier.
Firm spot rates for the smaller ships have helped sentiment for the capesize sector, John Kartsonas, founder of asset management advisory firm Breakwave Advisors, told TradeWinds.
"Sentiment is king in shipping, and thus capesize owners saw the window of opportunity and naturally moved their price ideas higher," he said.
The futures market also saw gains on both close-in and longer-term contracts through the end of 2023.
Capesizes performed best on paper, jumping as high as $1,989 per day on Friday to $39,543 per day for July. This was a 24.3% rise from $31,804 per day for July contracts on 4 June.
The paper market tends to drop after a few days, however, when physical and future rates go up simultaneously, Katemoglou said.
"This is not an actual drop in the sense of lost confidence in the market, but rather paper players wanting to secure profit," she said.
Kartsonas said capesize physical rates have turned around amid due to mid-June seasonality as expected but must reach the high $30,000-per-day range to justify the elevated future rates.
He said it would be an extraordinary repeat of the late-2000s "boom years" if capesize spot rates exceeded $40,000 per day for the next six months to align with future rates at that level.
"The question is whether we are in a similar environment today and what the drivers are this time around," he said.
"So, we have to wait and see what happens early next week."
