Capesize rates in particular are suffering from the lower iron ore exports volumes from Brazil as well as from lower bunker prices. Currently, more ship-owners prefer to fix shorter voyage route from Western Australia-Qingdao iron ore route as compared to the longer shipments from Brazil.
Moreover, the seasonal lull or the slow-down of construction activities in China has more or less “froze” iron ore demand as harsh winter descended upon the country. Thus, the average spot charter rates had reclined to $9,468 on Wednesday, down almost 12% since the start of the week at $10,732.
In the meantime, the iron ore inventory in Chinese ports has also increased considerably this week to a two-month high of 112.95m tonnes. The surge in stockpiles was due to the clearing of smog in ports which gave much better visibility for vessels to unload cargoes at terminals. However, it was heard that there is still a backlog of vessels waiting to be unloaded at the Chinese ports coming mainly from the Australian miners.
Panamaxes in contrast, haave become the darlings of the market after the downfall of capesizes. The freight rates of Panamax has inched upward steadily from $7,400 before ending at $8,148 or up 10% on 11 January 2017.
Despite the good run, one FIS FFA broker remarked that “the tone remains cautiously optimistic” as the market lacks of clear direction. Perhaps this cautious attitude had shrugged off from the decline of the Baltic dry index (BDI) during the week.
On Wednesday, the BDI had toppled from the 900 mark and stumbled to 894 points after a day-on-day drop of 32 points. With the fragile BDI, one wondered if the index will repeat history again with a sharp drop to all-time low of 290 points on 10 February 2016, just after Lunar New Year day.
However, the sharp fall in rates is deemed unlikely for 2017 as the Lunar New Year started ten days earlier from the previous year at 28 January 2017. Besides, the freight market is often mirrored a marathon; slow start at the beginning before picking up paces later.
With a better stronger footing as compared to 2016, let’s hope that the freight market will finish the “marathon” in a triumphant style and head toward an overall recovery.
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