Capesize freight rates reversed into correction, with some profit-takings from trade participants after the recent rally.
The Capesize 5 time charter average then plunged down by $637 day-on-day to $19,114 on Tuesday, after a selloff in the paper market.
The Baltic Dry Index (BDI) followed the correction and went down by 2.07% or 48 points to 2,271 readings, amid softening freight rates.
Short term correction from recent rally
Many trade participants accepted the freight corrections as reasonable, as freight rates had rallied under the strong support from smaller vessels for a while.
The recent output restriction on China’s steelmaking hub in Tangshan had also began to draw market concerns over lower iron ore demand ahead, while the coal shipments were affected by heavy rainfalls in Queensland, Australia, which the rainy weather is predicted to last for a few weeks.
In view of these bearish market factors, trade participants were more cautious in physical fixtures, though there were some enquiries for Indonesian coal cargoes and iron ore shipments for the key Western Australia to China route.
Meanwhile, the shipping activities were rather muted, especially in the Atlantic basin, as trade participants waited for better market clarity before making fixtures.
Bunker prices fall on bearish market sentiment
The falling bunker prices did not supported the freight rates, as the price of VLSFO went down further by $9.50/mt to $486/mt in the port of Singapore.
The low bunker prices followed the weakening crude prices which dropped toward $60 per barrel, after market doubts on oil demand recovery due to new pandemic curbs in Europe.
The saving grace for the crude oil slump may be credited to OPEC+, which stated that the members were unlikely to raise oil output amid market uncertainty.