Capesize rates are on a charge, leaping by more than 10% on the Baltic Exchange yesterday to stand on the cusp of the $30,000 a day mark thanks in no small part to strong volumes of iron ore from Brazil to northern China.
Moreover, FFAs look strong with March contracts of more than $30,000 a day – and the average FFA for the remainder of the year standing above $28,000 a day, and above $20,000 for the whole of next year.
“Spot rates continue to outperform expectations especially given the historical pattern of 1Q seasonal weakness,” a new report from Jefferies noted.
Capesizes look strong on paper, with SSY projecting 2024 tonne-mile growth of 3.3% versus a mere 1.3% forecasted fleet growth.
“The Atlantic market remains the main driver of such an astonishing yet surprising performance, while the reasons behind the current strength all point to inadequate vessel supply in the western hemisphere,” Breakwave Advisors noted in a recent report, which predicts a spot market that remains strong for a long period of time.
Analysts at Shipping Strategy wrote in a published note, “If the capesize market behaves according to its usual seasonal pattern this year, earnings in Jan and Feb should be around 50% of the annual average while the peak is usually in October at around 140% of the annual average. Should we get ready for average capesize earnings of $40,000 a day this year and a peak of $55,000?”
Tim Huxley, chairman of Mandarin Shipping, had some useful advice for cape watchers. As the guest speaker at the Hong Kong Shipowners Association annual analyst lunch earlier this month, Huxley told attendees: “The volatility we saw in 2023, particularly in the last few months reflected how finely balanced the dry bulk sector is, particularly the capesize market. Fleet positioning is likely to play a major role in how this year develops and hence watching the number of ships ballasting towards the Atlantic will give a real insight into incoming spikes in the market.”
The bullish sentiment is also reflected in the current capesize sale and purchase market where the volume of sales of capes and newcastlemaxes in recent weeks have been far above average levels.
Analysis from Greek broker Xclusiv shows that since early October 2023, secondhand prices have gained momentum with the capesize sector experiencing a particular surge, with both prices and sales activity at high levels compared to recent years. Notably, five-year-old, 10-year-old, and 15-year-old vessels saw their values jump by 18%, 27%, and 23%, respectively – the highest levels in the last five-year period. This optimism is translating into a vibrant sales market. Between October 2023 and February 2024, 55 capesizes have changed hands.
