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China’s iron ore imports so far in 2023 have exceeded the record set in 2021 with imports from Australia up by around 2.5%, from Brazil around 7% and from Canada around 4%, offsetting falls in imports from South Africa of around 5.5% (no BRICS loyalty premium for South Africa there). Chinese steel mills reported low inventories for August so a degree of restocking appears to be going on, along with rising steel output which traditionally increases in September. Meanwhile, China’s central bank made a further 0.25% cut to the reserve ratio requirement for state banks in mid-September, bringing it down to 5%, aimed at supporting their lending to construction and infrastructure sectors. Capesize freight markets seem finally to be responding to the news as owners’ confidence in China’s economic activity increases. The benchmark Western Australia to China iron ore freight price improved by a quarter in the four weeks to September 22, ending up at $9.50 or so, resulting in a 43% improvement in the Baltic Exchange’s TCE assessment to $17,274, the highest number since May this year. Panamax bulk carrier operators are anticipating a firm grain season this year following what brokers called a flurry of fixing of cargoes from the west coast of North America for early October loading dates leading to a daily hire premium over mineral cargoes from Asia of around $1,500 per day by the middle of September. As owners turn their gazes to the North American grain season, freight rates for cargoes of coal from Australia and Southeast Asia reacted, climbing higher until a wobble in confidence in the third week of September slowed momentum. Thus, daily hire rates for a standard panamax bulker on the North Pacific round voyage starting and ending in China rose 40% in the 30 days to September 22, ending up at $12,692 though they had peaked at $13,163 two days earlier, basis Baltic Exchange data. Similarly, daily hire rates for the South China Sea round voyage loading coal in Indonesia rose 33% over the same period to $13,361. The Atlantic was comparatively quiet if profitable for panamaxes in September, with the round voyage commencing and ending in the UK/Cont flat at around $14,000 a day throughout the month. Trips from Northeast Asia back to Europe attracted a 28% increase in daily hire rates by September 22 compared to August 22, standing at $6,889. Overall, the panamax 4TC was up 12% for the month to September 22 at $13,828 but had breached $14,000 a few days earlier. These levels had not been achieved since April this year. The supramax freight market enjoyed some vigorous gains in the 30 days to September 22, led by voyages from the UK/Cont to the US Gulf which gained 124% to reach $17,986. The reverse route added 53% between the same dates to reach $17,393. Steels and “on again” grains from the Black Sea eastwards picked up too, with the Baltic’s S1B_58 route nearly doubling to $25,271 on the month to September 22. Supras that discharge cargoes in China then are hired to load coal in Indonesia for discharge on the east coast of India provide steady backhaul business. Earnings on this route added 43% over the month to reach a useful $14,613. As the US grain season gains momentum, supramax earnings from the US Gulf to Northeast Asia via the Panama Canal rose 45% over 30 days to September 22 to reach $23,236, numbers not seen since April 2023. Overall, the Baltic Exchange’s S10 time charter index added 49% over the period in question to reach $14,906, double the levels of early August and a welcome harbinger of a hopefully firm final quarter of the year. The Atlantic basin has rewarded handysize operators fortunate enough to be in the right place at the right time during September. Westbound rates from Europe to the US east coast ballooned from a miserly $5,000 or so in mid-August to a hearty $13,500 and rising by September 22. Meanwhile the voyage from Europe to the US Gulf practically doubled over the same period to $15,600 with more in the tank. The reverse fixture from the US Gulf to the UK/Cont more than doubled to a few dollars shy of $13,000 between early August and September 22. In the Pacific, the Baltic’s HS5 route starting in South East Asia and loading in Australia before returning to a wide range of South East Asia to Japan was up 13% in 30 days to $10,681 by September 22 while the Northeast Asia – west coast of North America was up 12% to $9,463 over the same dates. The HS7 handysize average is up 38% in a month to a comforting $12,068. For the first 22 days of September the BDI averaged 1,070 points, less than 1,150 in August and still inside its narrow four-month range, but momentum and confidence are building as the annual seasonal peak approaches. Has the market cycle bottomed out yet? We have been through the weakest Q3 in the last five years; freight market risks should be increasingly on the upside from here on.

Dry cargo is finally back on track

Why owners ought to be optimistic about Q4.

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