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Capesize Market Seen Flat to Higher

Owners resist lower rates

By MarEx 2014-07-24 10:15:00

Rates for capesize bulk carriers on key Asian routes could remain flat or show marginal improvement next week as ship owners resist attempts by cargo owners to depress freight prices, ship brokers said.

Capesize freight rates from Australia to China showed a slight gain in the week through Wednesday as owners held out for higher rates than charterers offered. Rates from Brazil to China continued to fall as too many ships chased too few cargoes.

"There's been a little bit of an improvement on Australia-China but overall it's pretty depressing," said one Singapore capesize broker on Thursday.

"Going into next week rates for Australia-China may get to $8 a tonne," he said. Rates for a voyage from Brazil to China could inch up to around $18.50 per tonne, the broker added.

"Current rates are too low for Brazil to China," the broker added.

While miners including Rio Tinto, BHP Billiton and Fortescue Metals Group all chartered capesize ships, activity was relatively quiet, the Singapore broker said.

Some 11 ships were fixed to haul iron ore from Australia to China in the week to Wednesday, compared with 12 in the previous seven days, Reuters shipping data showed.

"Apart from seasonal doldrums coal trading [from Australia to China] appears [to be] at a particular low," Norwegian ship broker Fearnley said in a weekly note on Wednesday.

This lack of coal fixtures also weighed on capesize freight rates, the Singapore broker said.

Rates for the Western Australia-China route closed at $7.83 per tonne on Wednesday, up from $7.56 per tonne a week earlier.

Freight rates for the Brazil-China route closed at $18.30 per tonne on Wednesday compared with $19.11 per tonne last week.

Charter rates for smaller panamax vessels could slip lower as the available tonnage outweighs a slight revival in chartering activity, a Singapore-based panamax broker said on Thursday.

"The north Pacific market is steady with petcoke and coal cargoes," the broker said. There had also been an increase in interest for larger panamax ships to haul coal from Australia, the broker said.

But the large number of ships available for charter continued to depress rates, the broker added.

Rates for a panamax transpacific voyage closed at $4,228 per day on Wednesday, against $5,181 per day last week.

"In the east, the list of open vessels is still huge, and with limited trading, we saw a small dip in rates," Fearnley said in its note.

Charter rates for supramax vessels in Asia were stable this week, Fearnley said.

The Baltic Exchange's main sea freight index closed at 727 points on Wednesday, down from 755 a week earlier. Technical analysis showed the index is still targeting 664 in a week, the same target level as last week. 

By Keith Wallis (C) Reuters 2014.