Capesize time charter equivalent rates have dropped sharply in July after breaching the key $30,000/day level in end-June, amid excess availability of spot vessels especially for trips within the Pacific.
The time charter equivalent rate for a non-scrubber fitted Capesize vessel opening in north China to move iron ore from Western Australia to China was assessed at $15,109/d on July 21, down about 58% from $35,716/d seen on July 3, which was the highest level reached since Platts started this assessment on November 1, 2019.
There were more spot vessels than there was demand for moving cargoes, sources pointed out. Fewer iron ore cargoes were seen in the market from iron ore mining majors out of Western Australia, they said.
“Interest from ship-operators is not there like there was three weeks ago when the market was pushing up,” a shipbroker source said. Speculative activity from operators was required to bring some support to this market, he added.
“Overall [cargo] volumes from miners in July has been much less compared to June 20-30,” the shipbroker said.
Plunging freight forward agreement rates added to the bearish sentiment.
Meanwhile, supply of ships was increasing as vessels delayed at Chinese ports over the previous weeks were coming in, market sources said.
“Congestion is a double edged sword — it can push markets up, and can crash it down like what is happening now,” a Capesize ship-operating source said.
“I have noticed that the tonnage list in the Pacific is too long, especially during these two weeks,” a Capesize ship-owning source said.
Freight rates in the Atlantic basin are also falling.
“Many of the ballasters are fixed to operators rather than end-users. As the spot demand from Brazil is not strong, the freight rate for early August laycans is under pressure,” the shipowner source said.
With many ships ballasting out of China currently, the freight rates would likely be depressed for second-half August loading dates out of Brazil, the source added.