Dry Cargo

Capes surge across the board

Capesize rates, bubbling away for the past week, are now at three-month highs. The Baltic’s capesize index jumped 249 points, or 8.6%, to 3,132 points yesterday. Average cape daily earnings gained $2,065 to $25,976.

The front month capesize futures contract traded at near two-year highs of $30,000 on Monday, a huge improvement from the $9,000 level two months ago. The cape FFA markets were described by brokers Lorentzen & Stemoco today as being in a “frenzy”.

The Norwegian broking house said of the overall cape segment today: “The market is now firing up, and fixtures done on last done basis are continuously being exceeded.”

Rival Allied Shipbroking observed in a weekly report that the overall demand has improved with more fresh enquiries being witnessed across the Atlantic and the Pacific basins. Owners have been able to take advantage of last week’s imbalance between charterers’ interest and available tonnage lists, the Greek broker pointed out.

The cape run has been brewing for the past few weeks with a heavy increase in capesize loadings recorded in several countries in March.

India, China and Russia all saw their highest monthly export total on record in March, with 1.9m, 1.4m and 3.2m tonnes of dry bulk loaded on capesizes according to AIS tracking data analysed by Braemar ACM.

Meanwhile, capesize cargoes loaded in Canada and Indonesia increased 55% and 127% month-on-month in March respectively, totalling 5.6m and 6.3m tonnes, marking Indonesia’s second strongest month on record.

Cape loadings in South Africa and the US increased by 18% and 30% month-on-month respectively in March.

“High iron ore prices have likely allowed China to diversify its iron ore purchases away from the low cost Brazilian and Australian producers. At these price levels, smaller miners have emerged as exporters, helping to boost bulker demand,” Braemar ACM observed in a note to clients yesterday.

China’s stimulus-driven demand has helped propel earnings. So far this year Chinese steel production is up 13% and infrastructure investment up as much as 37%.

Capes have finally caught up and surpassed their smaller dry bulk cousins with panamaxes, supramaxes and handies all enjoying tremendous unseasonal strong starts to the year.

The solid dry bulk earnings in the first 14 weeks of the year has been reflected in the financial markets where a dry bulk shipping exchange traded fund (ETF) has been crowned the best performing ETF in the first quarter of the year.

According to ETF.com, the Breakwave Dry Bulk Shipping ETF provided by New York-based Breakwave Advisors returned almost 120% in the first three months, smoking the cannabis-related ETF that came in as the second best performer in the period with gains of 66%.

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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