By Krystal Chia (Bloomberg) — Freight rates for bulk commodities, which were torpedoed earlier this year as China’s economy took its initial hit from the pandemic and as iron ore cargo volumes fell, are showing signs of a recovery.
The Baltic Exchange Capesize Index has risen for the past seven weeks as activity in Asia’s top economy improves, and iron ore volumes recover following seasonal bad weather that had crimped shipments from Australia and Brazil.
“China was the first country to be hit by the virus crisis, but is now also the first one to get out of the crisis,”said Ralph Leszczynski, research manager at shipbroker Banchero Costa & Co. “Things are slowly but steadily getting back to normal there.”
Still, the outlook remains mixed. While Australian miners have ramped up iron ore exports, Brazil’s shipments are still trending below average, according to Rahul Kapoor, global head of commodity analytics and research for maritime and trade at IHS Markit.
Brazil dispatched 70.5 million tons of ore in the first quarter, compared with 84.3 million tons in the same period last year, based on official figures. On Monday, miner Vale SA cut its guidance for full-year iron ore output.
The picture for demand is also uncertain, although investors are betting on the prospect of more state support to cushion growth in China. While Chinese stimulus bets are supporting optimism, the lower economic activity’s likely to cap any meaningful recovery in rates, he said.
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