Market participants were in doubt if the Capesize market would continue to enjoy higher rates over potential supply outages from Brazil.
The expected lower volume from Brazil was met with high iron ore prices that firmed up rates as the Capesize 5 time charter average jumped by $141 to $3,369 on Friday.
The jump was attributed to the buoyant Q3 contracts which saw some small improvement on the index as well as more European players’ entry into the market .
Decline in Brazilian iron ore shipment
There was some market concern over supply outages in Brazil, due to the jump in coronavirus cases in the country, second only to the US in term of global ranking.
The market was further spooked by 200 confirmed cases of Vale’s mine workers operating at Itabira mine, which prompted state authority to close the mine.
However, Vale later overturned the court ruling and implied that the mine will not be shutdown and continued to operate as usual after winning an injunction.
Despite the recovery, some trade participants still expected a decline of shipping ton-mile demand from Brazil which might affect freight rates.
Meanwhile, some market participants expected the higher iron ore prices that went over $100/mt to provide some firm support on freight rates over near term.
However, the high iron ore prices may attract more iron ore cargoes from other places as producers from Canada, India and Black Sea regions exported more to take advantages of better prices.
Shanghai to launch new VLSFO futures in June
Bunker prices continued downward trajectory with the VLSFO price dropped by $8.50 for $264.50/mt at the port of Singapore.
Despite the falling bunker prices, the Brent crude prices had a better run, rising toward at $38 per barrel, while the WTI dropped toward $35 per barrel.
In the meantime, Shanghai International Energy Exchange (INE) is scheduled to launch VLSFO futures trading in June, with testing to be carried out from June 1-12 period.
The contract is set at 10 mt lots with physical settlement denominated at RMB, with trading limits set at price movement for not more that 13% in either directions.