dry bulk ship

Asia Capesize Rates to Stay Flat Despite Increase in Idle, Scrapped Chips

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March 3, 2016

Friday’s session marked 11 straight days of gains for the Baltic Dry Index. Photo credit: Shutterstock/tcly

ReutersBy Keith Wallis

SINGAPORE, March 3 (Reuters) – Freight rates for capesize bulk carriers on key Asian routes are likely to remain flat as the number of vessels for hire outpaces cargo demand, ship brokers said.

That came despite an increase in number of idled ships and ships sent for demolition, brokers said.

“I expect the market to stay at the same level for a while – at least one or two weeks,” a Shanghai-based ship broker said on Thursday.

“Generally, the first quarter is the weakest; we could expect an improvement in April,” the broker added.

“The market is very flat – there is still a lot of vessels,” the broker said.

Around 70 capesize vessels are idled or available for charter in the Pacific with around 50 waiting for cargo in the Atlantic, brokers said.

Capesize vessels totalling 5.2 million deadweight tonnes have been sold for scrapping since January, a 94 percent increase compared with the same period last year, figures from British shipping services firm Clarkson showed.

But delivery of new capesize vessels this year has matched the volume sent for demolition.

“Deliveries are a big number – 29 vessels have been delivered this year, also above 5 million dwt,” the Shanghai-broker said.

The extreme imbalance (between cargo demand and tonnage supply) in the capesize market has not been seen for three or four decades, Norwegian ship broker Fearnley said in a note on Wednesday.

“(The) focus is divided between spot challenges and concern for big and medium industry names struggling to survive. Daily spot earnings have dipped a further 10-15 percent week-on-week to an apocalyptic $2,200,” the Fearnley note added.

That compared with current daily operating costs of around $7,000-$7,500, according to accountancy firm Moore Stephens.

“Mineral volumes keep on disappointing for both fronthaul, transatlantic and transpacific,” Fearnley said.

Capesize charter rates for the Western Australia-China route climbed to around $3 per tonne on Wednesday, up from $2.92 a tonne last Wednesday.

Rates for the Brazil-China route slipped to $5.45 per tonne on Wednesday compared with $5.72 per tonne the same day last week.

Rates on both routes have been range-bound for the last two months.

Panamax rates for a North Pacific round-trip voyage rose to $3,387 per day, up from $2,926 per day last week. That is the highest since Nov. 13.

Rates were buoyed by increased chartering volumes in the Pacific that were supported by a rise in grain cargoes in the Atlantic, a Singapore-based panamax broker said on Thursday.

Freight rates for smaller supramax vessels were firmer on increased fixing activity, Fearnley said.

The Baltic Exchange’s main sea freight index rose to 335 on Wednesday, up from 322 last week, but could test resistance at 348, Reuters technical analysis showed.

(Reporting by Keith Wallis; Editing by Biju Dwarakanath)

(c) Copyright Thomson Reuters 2016.

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