Capesize freight rates headed south again in another round of volatile trading in the market with concerns over cyclone development and lower shipping demand.
The Capesize 5 time charter average then fell further by $884 day-on-day to $24,631 on Friday, with lower paper volume traded in a volatile market.
The Baltic Dry Index (BDI) moved downward on weaker freight rates and dropped by 1.47% day-on-day or 27 points to 1,810 readings.
Short term bearish outlook for freight market
Both basins’ freight rates slid over bad weather concerns and lower shipping demands in key routes in moving of iron ore cargoes.
For instance, the freight rates were down in the Pacific basin as trade participants were concerned on the cyclone development off the coasts of Australia.
Though Cyclone Lucas is expected to ease off the western coast of Australia in near term, however trade participants were worried about new cyclones formation amid the cyclone season of Australia.
Similarly, freight rates were dropping in the Atlantic market as well, with market concerns on rainy season in Brazil, while shipping demand out of Brazil was low amid a standoff between the shipowners and charterers.
Bunker prices slide on weaker crude demand
The bunker prices continued to slide on softening crude oil prices, as the price of VLSFO dipped further by $5/mt to $450.50/mt at the port of Singapore.
Oil demand outlook took a fall with higher build-up of US crude inventories and market concerns over rising coronavirus cases that resulted in more countries’ lockdowns.
Oil consumption seemed to slow down with the build-up of US crude inventories, which rose by 4.4 million barrels in recent week, as compared to market estimate of an inventory draw around 1.2 million barrels.
Despite the slower oil consumption, Goldman Sachs maintained its bullish outlook on oil demand, due to the upcoming $1.9 trillion US stimulus package for 2021, which may increase US oil demand by 200,000 barrels per day.