Capesize freight rates softened by mid-January, despite having the strongest opening at the start of the year as opposed to historical norm of weak seasonality.
The Capesize 5 time charter average then dropped for the third consecutive days by $990 day-on-day to $23,989 on Friday, despite some decent gains made in the prompt contracts.
The Baltic Dry Index (BDI) followed the weakening freight rates and dropped by 2.12% on-day or 38 points to 1,754 readings.
Not a normal January for Capesize
Capesize freight rates rose to a three-month record-high in early January, atypical of cyclical trend of lower freight rates at the start of year.
The abnormal strong January opening was due to market concerns over tighter tonnage supply caused by bad weather off coastal China and the high raw material prices that drove up tonnage demand.
However, the shipping demand then slowed down over market concerns on declining steel demand from cold winter and rising global coronavirus cases.
Later, China’s improving weather conditions also implied the returning of more tonnage to the market and weakened the support for freight rates.
Despite the volatile market, the Pacific market still had moderate shipping demand that supported the freight rates, with indicative rates heard at the range of $8.65-$9.00/mt for the west Australia to China route.
Meanwhile, things were much quieter for the Atlantic market, as trade participants waited for Vale’s update on the recent fire incident in its terminal at Ponta da Madeira.
Bunker prices slide on softening crude oil prices
Bunker prices continued to slip on weaker crude oil movement, as the price of VLSFO dropped by $0.50/mt to $452/mt at the port of Singapore.
The slight price decline was in-line with Brent Crude oil prices sliding from the $55 per barrel mark, due to uncertainty over oil demand with more countries’ lockdowns and resurgence of coronavirus cases in China.
However, there was some optimism in the market as well, with Iraqi oil minister predicting oil prices to reach around $60 per barrels at the Q2 2021, following the supply cut of additional 1 million barrels per day (bpd) from Saudi Arabia.