Capesize freight rates dipped on mixed market sentiments, due to lower cargoes list in the physical market.
The Capesize 5 time charter average then went down slightly by $98 day-on-day to $17,310 on Wednesday, from a subdued trading market.
The Baltic Dry Index (BDI), however rose slightly by 0.49 % or 7 points to 1,425 readings, due to market expectation of better Panamax and Supramax sectors from the strong grain demand in Asia.
Tighter tonnage supply amid bad weather
Despite the softening rates, some trade participants expected some upticks in the Pacific market, due to further tightening of spot supply in North China as the harsh winter might force some closures among Chinese ports.
However, the cargo list had thinned out in the Pacific market, as many early cargoes had been fixed, which might lead to slower trading activities in the near term.
Meanwhile, the Atlantic market was muted due to standoff between miners and operators, while there were concerns over lesser iron ore production and shipments due to the rainy season in Brazil.
Bunker prices to support freight rates
The higher bunker prices, however, may offer some support to firm the freight rates as the price of VLSFO rose by $15/mt to $430/mt at the port of Singapore.
The bunker price upticks followed the strength of crude prices movement, after a draw of US crude inventories by 8 million barrels for the week ended on Jan 1.
The crude oil prices were also strengthened by Saudi Arabia’s voluntary decision to reduce its oil output by 1 million barrels per day (bpd) in February to support firmer oil prices.
As such, Goldman Sachs predicted Brent crude oil prices to reach $65 per barrel by the end of 2021, in view of limited uptick in oil production from the OPEC +.