The dry bulk spot market posted a one-week slump on Friday as torrential rains kept a lid on Brazilian iron ore exports, dragging capesize spot rates down.

The capesize 5TC, a spot-rate average weighted across five key routes, dropped to $12,407 per day, according to Baltic Exchange data. That was a seven-day drop of 38.5%.

"Weather is always the issue in Q1, and I expect this to remain the driving force behind capesize rates," said John Kartsonas, founder of Breakwave Advisors' dry bulk ETF-trading platform.

He expects the average spot rate for capesizes to fall below $10,000 per day because spot rates for two major routes — Australia to China, and Brazil to China — are already at that level.

The C10 transpacific route, which tracks roundtrip voyages taking iron ore from Western Australia to China, declined the most among the benchmark capesize routes. It fell to $6,242 per day on Friday, a one-week decline of 65.6%.

"The North Atlantic is basically keeping the index up, but again, the probability of the index going down [below $10,000 per day] is high," Kartsonas told TradeWinds.

"However, sentiment is still firm, as it is easy to see why we are dropping. It is the rains in Brazil, and the anticipation is that once this clears, the pent-up demand should lift rates going into the spring."

Rio Tinto fixed an unnamed capesize on Friday to deliver 170,000 tonnes of iron ore from Western Australia to China at $7.10 per tonne.

It was reported to have paid $10.10 for a similar fixture on Monday.

Market looks a little better on paper

The market remains at the mercy of the weather for the next few weeks, says Braemar ACM Shipbroking's Nick Ristic. Photo: Baltic Exchange

The paper market showed a higher forward curve despite losing some ground over the past week, indicating that market participants expect a swift recovery in physical rates in the spring, Kartsonas said.

The forward-freight agreement (FFA) rate for February came in at $13,125 per day on Friday after falling 23.1% from the previous week.

It was even higher for March, $16,593 per day, after losing 15.1% in a week.

"For now, though, it is a cold, rainy winter for capesizes," Kartsonas said. "Ships prefer to stay in the Pacific as they see no cargo in Brazil due to rains."

But the capesize market has luckily avoided the seasonal cyclones in Australia thus far, said Nick Ristic, lead dry cargo analyst at Braemar ACM Shipbroking.

"This year we have luckily not had that yet, but Brazil has been particularly wet, which has given the Pacific shippers plenty of leverage in chartering negotiations," he said.

"In short, for the next few weeks the market remains at the mercy of the weather."

Average spot rates for dry bulk shipping's smaller asset classes also posted significant weekly declines on Friday.

The panamax 5TC dropped 20% to $21,376 per day; the supramax 10TC declined 8.5% to $20,868 per day; and the handysize 7TC was down 8.3% to $21,464 per day.