Capesize market continued its positive run with more fixings and stronger Pacific market that drove better freight rates.
As such, the Capesize 5 time charter average rose by $481 to $2,875 on Monday, as some trade participants were heard to do “bottom picking” after another round of short covering.
Driven by better Capesize rates, the Baltic Dry Index (BDI) also rebounded higher to 427 readings on Monday, bringing hope that freight market has bottomed out.
Pacific market, the main driver of the rally
The key route of west Australia to China had kept the upward momentum going as the major miners were heard to be moving as much as iron ore as possible.
Thus, freight rates had jumped over the $4/wmt level again, where the key route of west coast Australia to Qingdao were heard to done at the $4.10-$4.25/wmt range.
However, some trade participants were skeptical of the rally and expected a correction in near term as they did not believe the demand can absorb all the supply glut in the market.
More coronavirus concerns for the Atlantic market
The Atlantic market remained the weakest link for the overall rally, as trade participants were concerned over the escalating coronavirus situation in Brazil, which might affect shipping activities.
The lengthy ballaster tonnage list for the first half June was also one of the main concerns for bearish market.
Some market participants believed that the rally in April was too quick and too soon, causing many to ballast their vessels to Brazil and result a glut as result.
Besides ballasting to Brazil, there was also many Capesize vessels drifting toward Singapore and South Africa, as owners expected these countries to lift their lockdowns soon and introduce stimulus programme to kickstart their economies.
Rising bunker prices support freight rates
The rising freight rates had to do with the rising bunker prices, as the VLSFO bunker prices hiked up by $22 to $272/mt at the port of Singapore, following the rally in the crude oil prices.
Brent crude prices went up higher toward $35 per barrel level, while the WTI gained toward $32 per barrel, due to record low rigs count in the US since the mid-2009 to a total of 258 by 15 May 2020.
Despite the oil recovery, some industry experts felt that the physical oil market was not “out of woods yet”. As commodity consultancy firm, Rystad Energy expected a build-up of 13.7 million barrel per day of implied liquids during the month of May 2020, which will be hard for the market to digest.