Freight rates for large capesize dry cargo ships to go lower

Freight rates for large capesize dry cargo ships on key Asian routes are set to slide next week as the number of ships available for charter outpaced cargo demand, ship brokers said on Thursday. "Charterers are in the market but there aren't that many cargoes to support the volume of ships. There is a softer feel to the market," a Shanghai-based capesize broker said.
Owners were left puzzled after South Korean operator Polaris Shipping offered $11.95 per tonne to charterers for a voyage from Brazil to China on Thursday. That was a discount of 45 cents per tonne, equivalent to a loss of $76,500 on a typical 170,000 tonne iron ore capesize cargo, to the prevailing Baltic index rates, brokers said.
"Nobody can understand why Polaris is offering a heavily discounted rate," the Shanghai broker said. "It gives no confidence to other owners, who cannot offer higher numbers," the broker said. Polaris Shipping was not immediately available for comment. While ship owners were offering $6.20 per tonne for a voyage from Western Australia to China, charterers were bidding around $5.80-$5.90, a Singapore capesize broker said.
"At the moment, the market doesn't look as if it's going anywhere so it is likely to drift down," the Singapore-based broker said. That came as Chinese iron ore imports surged to 92.99 million tonnes last month, the second highest on record, customs data on Thursday showed. A relatively strong demand from the housing and infrastructure sector has boosted steel production, which is expected to increase further amid low inventories, said Daniel Hynes, commodity strategist, ANZ.
Iron ore and coal are key ingredients in steel making and the staple cargoes for capesize ships. Charter rates for the Western Australia-China route climbed to $6.10 per tonne on Wednesday against $5.65 per tonne the same day last week. Freight rates from Brazil to China rose to $12.40 per tonne on Wednesday compared with $12.14 per tonne on the same day last week.
"The Brazil market has been quiet and Western Australia is not as active as usual," Norwegian ship broker Fearnley said in a note on Wednesday. Charter rates for smaller panamax vessels for a North Pacific round-trip voyage surged to $6,387 per day on Wednesday from $5,769 per day last week.
"The return of the Chinese after holidays last week brought the (panamax) market back to life in both hemispheres. Higher bunker prices also giving a positive contribution to freight levels," the Fearnley note said. For smaller supramax vessels, freight rates in the Far East climbed to around $6,600-$6,800 per day this week from $6,000-$6,500 per day last week, brokers said.