The capesize index declined 71% in 14 trading days through to yesterday, one of the fastest drops in history, according to Breakwave Advisors with rates for backhaul shipments now in negative territory.

The Baltic Capesize Index closed yesterday at just $2,893 per day, roughly one quarter of the typical daily operating costs for these large bulk carriers.

In a new report Breakwave Advisors described the “lethargic” iron ore activity out of Brazil taking a toll on capesize rates, as the anticipated seasonal increase in exports has so far failed to materialise.

“Looking at history, dry bulk rates have never been lower for this time of the year,” Breakwave Advisors stated, before concluding on a more positive note: “Seasonality is a powerful force, driven by higher cargo flows. As economies open, and trade normalizes, the potential of pent-up demand is definitely in the realm of possibilities, which combined with already high stimulus activity, could lead to a much better second half of the year for dry bulk.”

Lorentzen & Stemoco, in a report out today, suggested the numbers coming out of the Baltic Exchange yesterday reminded the dry bulk community about 2016, the worst year in modern history in the dry bulk market. Fixtures were discussed yesterday at $3.6 per ton for the C5 between West Australia and Qingdao, calculating into just $1,200 a day.

“At below $5,000 per day on a TCE basis, i.e. well below running costs, that’s pretty much as low as it can get short of actually laying them up,” Ralph Leszczynski, head of research at Banchero Costa, told Splash today.

Leszczynski said that the third and fourth quarter of the year are always seasonally stronger than the first half of the year for capesizes, due to the fact that the beginning of the year is the raining and cyclone season in Brazil and Australia, and that coal demand tends to peak in autumn as the northern hemisphere stocks up for winter.

“I frankly expect this seasonality to be further boosted this year, and the first part of this year has been devastated by the Covid-19 pandemic, but things are slowly improving, especially in Asia, and I’m still optimistic that things will get back to more-or-less normal towards the end of the year,” Leszczynski said, striking a similarly upbeat tone to the Breakwave report, and something that was echoed by John Michael Radziwill, CEO of GoodBulk, in a recent video carried on this site as part of our ongoing Maritime CEO Leader Series powered by Ocean Technologies Group.

Less optimistic was Peter Sand, the chief shipping analyst at BIMCO, who told Splash today that cape rates have yet to bottom out.

“Consumer demand is not off the ventilator any time soon, I’m afraid and that puts a drag on iron ore demand and demand for capesize services,” Sand warned.