Panamax freight rates for the benchmark Asian route rose to the highest since January as a steady increase in chartering demand supported views that market sentiment would be strong in coming weeks.
Spot voyage fixtures for modern panamax rates for the benchmark US Gulf to Japan route were quoted around $38-$40 per tonne on Tuesday from about $36 a week earlier. The level was the highest since early January.
"There is no clear reason why shipping rates are rising, but the market is becoming more convinced that rates will not fall much despite seeing more availability of new vessels," a broker at a Japanese shipping company said.
"Charterers had hoped for rates to edge down, but after seeing firmness in the past few months they are starting to be more aggressive to book vessels, and that's boosting overall sentiment," the broker said.
Tokyo brokers said they were not sure whether freight rates would extend sharp gains in coming weeks as activity usually slows during the summer. Shipping rates have been already supported by firmness in the smaller handymax-class sector.
Handymax vessels carry 22,000 to 40,000 tonnes and mainly ship grains and cement.
Handymax vessels have been in demand this year to carry cement and other building materials to the US Gulf Coast, which is undergoing reconstruction after last year's powerful hurricanes.
The vessels in many cases would then be used to transport grain from the US Gulf area. Demand for ships has made a seasonal shift to transporting newly harvested grain and oilseeds from South America to Asia.
"I think the firmness in handymax and capsize vessels is finally spreading to the panamax sector," another Japanese shipping company broker said. "This trend will continue for a while, but I don't think rates will jump sharply from the current level." Panamax vessels carry 55,000 to 80,000 tonnes of freight, usually grains. Capsize ships carry more than 100,000 tonnes of cargo, mainly iron ore and coal.
Brokers said the market hopes to see strong demand for the larger capsize class from China.
Chinese steel mills have agreed with suppliers last week to pay 19 percent more for iron ore, retroactive for the year that started April 1, 2006. The agreement with China, the world's biggest steel producer, is in line with those reached with other major steel makers around the world, starting with ThyssenKrupp A.G, Germany's largest steel maker, on May 15.
Industry analysts said higher iron ore prices are unlikely to blunt rapid output expansions by Chinese steel makers, who are enjoying comfortable profit margins.
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