Tight supply and markedly increased demand in fronthaul and transatlantic trades, with some healthy assistance from West Australian exports, have seen daily cape rates soar more than 40% this week to edge towards $23,000 a day.
Brokers Fearnleys notes in its latest weekly report that the transatlantic trades have been leading the charge, with rates up nearly 60% to $27,500 a day.
The period focus has been on shorter durations supported by FFA values with modern 181,000 dwt tonnage for prompt China delivery fetching $23,000 a day for seven to nine month contracts.
Brazilian miner Vale looks like it is making good on its very robust 2018 production targets. Vale has forecast that it will produce a total of 390m tons of iron ore this year. First half output from the world’s largest iron ore miner stood at roughly 180m tons, meaning it will need to move more than 100m tons per quarter in Q3 and Q4 this year. By contrast, it moved just 82m tons in the first quarter.
Peter Sand, chief shipping analyst at shipowning organisation Bimco, noted that the week ending June 29 saw the highest number of Chinese iron ore spot fixtures done out of Brazil on record since January 2015.
“There is no doubt that Chinese demand for iron ore imports has been a key driver of the capesize freight rate surge,” commented Will Fray from Maritime Strategies International (MSI). “It’s important to recognise that despite China’s efforts to close outdated steel capacity – and worries over lower industrial output related to the imposition of US trade tariffs – production this year has been incredibly strong, supported by profitable margins.”
May’s output was 81.1m tons, up over 12% year-on-year, and more than 15% higher than the monthly average of 70.4m tons recorded in 2017.
It is not just iron ore volumes that are bolstering capes. In its latest weekly report, Allied Shipbroking noted that coal, the second main commodity for capes, has been showing a remarkable rise in trade volumes in the year so far.
On the sustainability of the current cape uptick, Bimco’s Sand told Splash today: “Volatility is expected for the remainder of the year. The dry bulk market is still on a recovery track. The second half is expected to build on improvements seen in the first half.”