September 2019
16-September-2019
In the first week of September 2019, surging iron ore exports from Brazil will keep Capesize and VLOC (Very Large Ore Carrier) ships in high demand in the Atlantic Ocean which will support the continued surge in dry bulk freight rates. Capesize market is witnessing a festive period with spot rates reaching record highs despite growing concerns of a slowdown in the global economy due to the USA-China trade war. Recent strength in spot dry bulk freight rates are expected to continue over Q4 2019 due to the upcoming IMO (International Maritime Organization) 2020 regulations and Brazil’s iron ore exports. In January 2019, Vale’s dam accident triggered widespread casualties in Brazil. Hence, iron ore supply from Brazil tumbled in the first half of 2019. In April 2019, Brazil could export less than 20 million metric tonnes of iron ore. Baltic Capesize Index (BCI) dropped to historical low values in the first week of April 2019. In Brazil, after approval from the court, Vale’s iron ore supplies have now resumed. After Vale’s dam collapsed in January 2019, Brazil’s iron ore exports registered a steep recovery. In July 2019, Brazil exported 34 million tonnes of iron ore which is more than 80% higher than the exports in April 2019. There is a strong demand for capesize bulk carriers in Brazil which created a shortage of capesize tonnage in the Atlantic Ocean. Hence, huge demand for capesize tonnage has been leading to skyrocketing spot capesize freight rates. Brazil exports most of its iron ore to China. China has been accounting for the lion’s share, capesize bulk carrier takes about 90 days to complete a round voyage from ex Brazil to China. Capesize bulk carriers that loaded cargo in June at Brazilian ports for discharge in China would be available again for loading only in September. According to AIS data, not many capesize bulk carriers and VLOCs (Very Large Ore Carriers) repositioned in the Atlantic to meet the surging demand in Brazil which triggered spot rates are on an upward spiral. Additionally, in the run-up to the impending IMO (International Maritime Organization) 2020 regulations, effective supply of capesize bulk carriers has contracted. In order to avoid using expensive low sulfur fuel and save on bunker costs, many shipowners are retrofitting their capesize bulk carriers with scrubber before IMO (International Maritime Organization) regulation comes into force on January 2020. Scrubber fitting at the shipyard takes about a month, during which time the bulk carriers will be removed from the operating fleet. In total, 45 Capesize bulk carriers and VLOCs (Very Large Ore Carriers) were retrofitted during June-August 2019 which is equivalent to 3% of the Capesize bulk carriers and VLOCs (Very Large Ore Carriers) operating fleet in terms of DWT (Dead Weight Tonnes). As IMO (International Maritime Organization) deadline (January 2020) approaches with almost 10% of the additional Capesize bulk carriers and VLOCs (Very Large Ore Carriers) fleet scheduled for retrofitting at shipyards in the remaining months of 2019. Hence, these two conditions will be taking the spot rates even higher during Q4 2019.
2-September-2019
On 2 September 2019, Baltic Capesize Index (BCI) reached 4,659 points, its highest level since 17 May 2010. Baltic Exchange’s five capesize routes (5TC) reached $36,101 per day today which is the highest in 9 years. In the last three weeks, capesize benchmark routes have increased by 27%. On 22 July 2019, Baltic Exchange’s five capesize routes (5TC) reached $32,963 per day. Capesize spot rate increase caused by cargo supply especially Brazil’s iron ore exports continues to outstrip the list of available capesize ships in the Atlantic Ocean. Brazil’s healthy iron ore demand struggled to find capesize tonnage. According to market veterans, capesize spot rates might potentially reach $50,000 per day over the next few months. In April 2019, Brazilian iron ore exports dropped to 18 million tonnes, but in July 2019 Brazilian iron ore exports reached 34 million tonnes which is predicted to stay at this level till the end of 2019. Baltic Exchange’s capesize Brazil-China (C3) benchmark reach to $28.73 per tonne. On the other hand, capesize spot rates for Trans-Atlantic (TA) round-trips continue to trade at around an $8,000 premium to those for round-voyages across the Pacific Ocean where capesize vessel supply is greater. On 2 September 2019, Baltic Exchange Capesize Index (BCI) Gibraltar-Hamburg (C8_14) for Trans-Atlantic (TA) round voyage reached at $39,725 per day. Baltic Exchange Capesize Index (BCI) China-Japan (C10_14) Trans-Pacific round-trips round voyage reached at $31,688 per day. Baltic Exchange’s Forward Freight curve still points to a bearish trend in rates for the rest of 2019. Current capesize spot rates reflect strong momentum in the physical shipping market. Baltic Exchange’s Capesize Forward Freight assessment for September 5TC contracts rose to $32,058 per day and October 5TC contracts rose to $28,708 per day. Baltic Exchange’s Capesize Forward Freight Contracts for the fourth quarter (Q4) 2019 also rose, but are still lower than those seen for the third quarter (Q3) 2019.