China’s steel sector remains in the doldrums as “market players are taking a fence-sitting attitude” after the Golden Week holiday according to analysts at ChinaSteel. Iron ore prices have stabilised a few dollars either side of $120 per tonne. Yet freight rates for iron ore from both Brazil and Australia to China have ballooned in October with the former pushing to over $26 per tonne and the latter advancing towards $11 per tonne with $10.70 being fixed for early November cargos, suggesting that the bull market has some momentum. Overall Capesize TCEs basis the Baltic Exchange’s C5TC average reached the psychologically important $30,000 per day level peaking at $31,089 on October 17, having bottomed out below $9,000 in early September.
As we reported last month, a good year for US farmers is expected to boost corn, wheat and soybean exports though the restrictions at the Panama Canal might affect volumes and voyages. The Canal Authority is rumoured to be cutting transits to 22 ships per day from November 1 from a peak of 36. Container ships are likely to be first in the queue. Will US grain exports lose out? Perhaps they will go into larger ships and round Cape Horn into the Pacific. For now per tonne rates are stable at around $57 ex Mississippi to Qingdao, equating to around $24,000 per day while rates on Santos to Qingdao are also stable at around $42 per day, equating to around $14,000 per day.
In the Pacific, round voyages from Northeast Asia to the North American west coast have subsided 10% in the month to October 20, to sit at $12,800 or so while rates on the Northeast Asia to Southeast Asia round voyage are have been stable at $13,500 or so, where they have mostly sat since mid September. Overall the panamax bulker market represented by the Baltic’s P5 TCE is up 1% month on month as of October 20 at $14,738.
Supramax owners enjoyed September but October has been relatively becalmed. The Baltic’s S6 TCE was $13,860 on October 20, just 3% lower than a month earlier. The best performing supramax route for October was S1C, from the US Gulf via Panama to Northeast Asia, reflecting those strong US grain export numbers. Rates added 27% to hit $29,264 by October 20 with upward momentum still likely before the end of the month. Similarly, rates from West Africa via Brazil to Northeast Asia have firmed adding 5% in the month to October 20, pushing over $20,000 per day.
By contrast, supramaxes employed on the South China to Indonesia and back again round voyage, usually shipping coal, were earning 20% less on October 20 than on September 20 at $11,769. China’s imports of Russian coal have tripled since Russia invaded Ukraine. China will import around 52 m tonnes of Russian coal this year up from 28 m tonnes in 2022. This may be leading to softer imports from Indonesia.
In the north Atlantic, supramax daily hire rates on both the east and west bound voyages fell 13% in the month to October 20 reflecting a momentary pause in Chinese steel exports and a surplus of tonnage for grain cargoes. China’s steel exports, basis customs data, were 652 m tonnes in January to august, up 20 m tonnes on the 2022 equivalent period. They might hit a peak if the EU and US sign the proposed Global Steel and Aluminum Arrangement – a trade deal that would introduce new tariffs on steel from China which benefit from alleged “non-market practices.” The deal seems likely because if it is not signed by the end of October, Trump-era levies on $10bn of exports from the EU to the US will come back into force on January 1, 2024.
Meanwhile weaker supramax rates in the Atlantic have not affected handysize earnings on the eastbound north Atlantic. These gained 10% in a month to reach $14,100 on October 20. This was the best performing handysize route in the last month. On the westbound voyage, daily earnings were down 1% at $14,557 and on the North Europe to Brazil route they were down 2% at $12,586. These are all decent numbers and owners will be happy enough that the market has found a profitable balance.
Handysize earnings in the Pacific have improved slightly. Rates from Northeast Asia on the transpacific round voyage have held steady at around $9,900 a day, while rates on the Southeast Asian round voyage have also been steady at around $10,800 a day.
For the first 22 days of September the BDI averaged 1,940 points, the best since July 2022 when rates were falling. Last month we asked whether the market cycle had bottomed out yet after the weakest Q3 in the last five years; October may be answering the question already.
This is one of the many market commentaries carried in the monthly title Splash Extra. Published on the last Wednesday of every month and priced for as little as $200 a year, Splash Extra serves as a concise monthly snapshot, ensuring readers are on top of where the shipping markets are headed. For more details on Splash Extra subscriptions, click here.
The traditionalist’s explanation is “There is not one, but two, wars on.” Book that cargo and stockpile it.