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Capesize Second-Hand Ship Prices Surge Amid Chinese Economic Recovery

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April 4, 2023

Capesize second-hand ship prices experienced a significant surge in March due to China’s economic recovery, according to a new report from the Baltic and International Maritime Council (BIMCO).

Filipe Gouveia, a shipping analyst at BIMCO, said that five-year-old second-hand prices rallied 22% month-on-month, reaching USD 54 million by the end of the month.

While capesize spot rates are still weaker than a year ago, they increased threefold in March compared to February levels, according to the Baltic Exchange’s capesize 5TC index. Iron ore, coal and bauxite shipments to China rose during the first quarter, strengthening the market’s belief that China’s economic recovery could be a strong driver for capesize demand this year.

China is an important market for capesizes, as two-thirds of capesizes offload their cargo in the country. Commodity wise, iron ore accounts for 75% of all cargo transported by capesizes worldwide, while coal and bauxite account for most of the remaining 25%.

“At current prices, a five-year-old second-hand capesize ship is selling for 87% of the price of a newbuild, nine percentage points above the 2022 average. It is clear that buyers are hoping to take advantage of an expected increase in rates in the short run,” said Gouveia.

However, there are still risks to the demand outlook. The Chinese government could mandate a reduction in steel production in 2023, which would weaken iron ore demand. Additionally, China’s real estate sector remains in a fragile state, which could dampen the recovery in iron ore demand. Nonetheless, new home sales increased 56% month-on-month in March, which could mark the start of a gradual recovery for the sector.

“To sustain high second-hand capesize prices, rates will need to significantly increase in the coming quarters. While the demand indicators for capesizes look promising, risks to demand still exist,” said Gouveia.

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