Capesize freight rates came under pressure in both basins with more selloffs in the paper market amid the soft physical market.
The Capesize 5 time charter average dropped by $1,550 day-on-day to $18,402 on Monday, as the FFA touched new lows in the morning session of $15,950 for Nov contract, then $15,000 for Dec contract and $18,000 for the Q4.
Following the soft freight market, the Baltic Dry Index (BDI) plunged by 4.60% or 68 points to 1,409 readings.
Bearish sentiments due to weak fundamentals
Market participants expected freight rates to drop further especially in the key route of Brazil to China route, as shipowners began to ballast vessels toward Brazil.
This was due to the lack of coal trading at the Australia to China route following the import restriction, while the Manila crew replacement also prompted more shipowners to ballast vessels toward Brazil.
Thus, the Atlantic market was oversupplied with the ballasters from the Asia-Pacific region that placed freight rates on backwardation.
Thus, the freight rate for a Capesize ship to move 170,000 of iron ore from Tubarao to Qingdao was assessed by Platts at $16.00/wmt, down 10 cents/wmt day on day.
Meanwhile, there was lack of thin demand in the Pacific market with only one mining major, Rio Tinto active in the market in fixing vessel to move iron ore from west Australia to China route for early November laycan.
VLSFO prices move south following weak crude prices
VLSFO prices dropped slightly by $1/mt day-on-day to $343.50/mt at the port of Singapore, following the downward trend of crude prices.
The bearish outlook of oil demand followed the rising coronavirus cases that forced countries to impose strict lockdown and reduced fuel consumptions. As such, the Brent crude prices moved toward $42 per barrel, while the WTI crude at the $40 per barrel level.
Thus, the International Monetary Fund (IMF) expected crude oil prices to remain virtual unchanged over the next year at the range of $40-50 per barrel range.