Daily Capesize Review 1/10/21
Capesize freight rates rebounded on tight tonnage supply, amid market uncertainty over power crunch in China and its impact on raw materials.
The Capesize 5 time charter average, then rose by $1,014 day-on-day to $75,190 on Friday, due to market optimism on better fronthaul fixtures.
The Baltic Dry Index (BDI) also inched up by $35, up 0.68% day-on-day, to $5,202, due to firmer freight rates.
Absence of Chinese trade participants slow shipping activities
Despite the firmer freight rates, the iron ore shipping activities seemed to slow down as Chinese trade participants celebrated weeklong holidays at the start of October.
In the meantime, there was market concerns over extended shipping disruptions due to port congestion and closures in China, affected by the power crunch.
Thus, there might be more demand for coal shipments to fix China’s power shortages, though iron ore shipping activities were slowed after declining prices and ongoing steel output that market expected to intensify in Q4.
There was also market talk of splitting of Capesize cargoes into Panamax-sized stems due to tighter Capesize tonnage and higher freight rates compared to the Panamax.
Bunker prices rise amid tight supply market
The bunker prices extended its gain, as the price of VLSFO inched up by $1.50/mt to $572/mt in the port of Singapore.
The steady gains reflected market expectation of firmer crude market ahead, due to higher demand that outpaced supplies. As the energy crunches that occurred in Europe and China might result in another round of oil prices spike.
Furthermore, crude oil production was under invested amid the pandemic period and the limited supplies might lead to multiyear run up in crude oil prices, according to the Bank of America.