The Baltic Exchange’s capesize bulker spot rate assessment has fallen to just above operating expense (opex) levels as the dry bulk sector awaits China’s return from the week-long Lunar New Year holiday, market data shows.
The Capesize 5TC basket of spot rate averages across five key routes plummeted 39.4% over the past week to reach $6,529 per day on Friday.
But shipping investor Joakim Hannisdahl suggested that spot rates’ proximity to operating costs points to a market floor.
“The ‘good’ news is that these levels are similar to opex and thus cannot fall much further,” the chief executive of Norway’s Gersemi Asset Management said on Twitter.
The dry bulk market has been headed down as activity slows in China but is expected to improve after Chinese New Year as the country reopens manufacturing and starts building again with government stimulus money.
“There was no sign of recovery in the capesize sector at least before the arrival of Year of the Rabbit,” Baltic Exchange analysts said on Friday.
Australian miner Rio Tinto hired an unnamed capesize to carry 170,000 tonnes of iron ore from Dampier, Western Australia to Qingdao, China at $6.70 per tonne after loading the ship from 3 to 5 February.
Last Friday, the miner fixed an unnamed capesize to carry the same amount of ore on the same route at $7.15 per tonne after loading from 29 to 31 January.
That Capesize 5TC figure of $6,529 per day is not that far above the nearly $5,589 per day it costs on average to run non-scrubbered, non-eco capesizes, according to the exchange’s daily operating expenses index’s latest number published on Thursday.
The difference was only $940 per day after the average daily cost went up 0.8% since 20 October, meaning the average spot rates for capesizes are just high enough to meet daily operating costs for these ships, per the Baltic Exchange.
“Indeed, rates are low, almost at opex levels,” John Kartsonas, founder of Breakwave Advisors, an asset management firm that runs a dry bulk exchange-traded fund, told TradeWinds.
“But this is one day, and trips last weeks, so I don’t see that as so important.”
But some pureplay capesize owners have reported that their ships cost much more than $6,529 per day to run.
For example, Seanergy Maritime, which owns 17 capesizes, reported in its third-quarter earnings that its ships cost $7,539 per day on average to operate.
Goodbulk, which has 18 capesizes in its fleet, reported a break-even earnings estimate of $10,816 per day for 2022 and projected a break-even figure of $10,521 per day for 2023 in its third-quarter earnings report.
And 2020 Bulkers posted a break-even figure of $15,700 per day for its newcastlemaxes of at least 208,000 dwt when it reported third-quarter earnings.
Smaller bulker sizes also posted declines over the last week but remained well above estimated daily operating expenses, Baltic Exchange estimates showed.
The Panamax 5TC declined 0.8% over the past week to come in at $9,544 per day on Friday, compared with the daily operating expenses index for panamaxes landing at $4,937 per day on Thursday.
The Supramax 10TC spot rate basket fell 4.2% over the past seven days to land at just over $13,900 per day on Friday, while the daily operating expenses index for supramaxes reached $4,982 per day.
The Handysize 7TC slipped 11.8% over the past week to $7,931 per day on Friday. The exchange’s daily operating expenses index for handysizes was $4,902 per day on Thursday.