Cape freight rate volatility picks up, as sentiment turns more positive

Cape freight rate volatility picks up, as sentiment turns more positive

Singapore: Capesize freight rate volatility has picked up in the past few days and there’s a chance rates could pick up in the third quarter, panellists at yesterday’s Singapore Iron Ore Forum maintained. The panel – made up of senior executives from Noble Chartering, Swiss Marine, Cargill and Tata NYK Shipping – noted the distinct shift in buying patterns over the last year – forward demand had disappeared, and instead people would wait until the last minute to book spot vessels.

Companies today have very little forward cover versus previous years, just fixing a few weeks ahead now.

With 60-70 capes scrapped so far this year, compared to just 25 in the whole of 2014, the capesize global fleet is on track for negative growth in 2015.

On this basis, the market could be underestimating the potential for cape rates to increase – there could be a recovery later in the year, the panellists suggested. Sentiment has just this past week turned more positive. The Baltic Dry Index closed yesterday up by another three points to 637.

The low freight environment has opened up the competitive playing field, bringing into play different routes that were not economic previously.

Low rates also helps miner margins, which may induce tonnage back into the market, adding more tonne-miles to freight.

The trend for upsizing of ships is set to continue, the panel concluded.


Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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