Average capesize earnings surged by $3,750 so far this week to reach $12,346 per day, the highest level since 28 January. Rates have been rising for twelve consecutive trading days, and Tuesday’s gain of $2,515 was the strongest in at least five months.
There are a few reasons behind the recent improvement in earnings. On the demand side, recovering iron ore volumes out of Brazil and Australia; and on the supply side, heavy congestion and zero growth in fleet capacity are believed to be the main drivers. A series of positive macroeconomic news out of China and improving sentiment in the paper market also helped lift rates.
After falling to its lowest level in at least four years earlier in the month, Vale’s shipments are expected to reach 7.3 million tonnes this week. Ex-Vale shipments are also on the rise with volumes lifting to well above 700,000 tonnes weekly. Overall, total Brazilian iron ore exports are expected to rise from about 2.5 million tonnes* at the beginning of April to just over 8 million tonnes this week.
Similarly, Australian iron ore exports bounced back strongly, rising from about 9 million tonnes per week mid-March to just under 18 million tonnes last week.
Tonnage supply also reacted positively to the weak freight market so far this year. Given the depressed earnings scrapping surged, with 20 vessels totalling 3.8m-dwt sent to the beaches between January and April. Deliveries totalled 13 vessels and 3.8m-dwt during the same period, yielding a zero net growth in carrying capacity.
However, tonnage supply is further restricted by heavy congestion. As of 28 April, 226 capesize vessels totalling 47.2m-dwt – about 18% of the total cape fleet – were waiting to load globally.
The vast majority of these vessels are tied up in Brazil and Australia as supply issues coupled with weather-related disruptions led to heavy delays in operations earlier in the year. As of this morning, there were 65 capes in Brazil and 91 capes in Australia waiting to load.
Although improving demand and recovering volumes are expected to support demand for ships, especially in the second half of the year, the unwinding of congestion is likely to weigh on vessel earnings in coming days.
Source:Arrow
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
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