- Brazilian iron ore exports to China rose in May, June, and July, with a 13.4% increase in July year-over-year. However, July saw a drop in freight rates due to an increase in ballasting vessels.
- Despite higher iron ore volumes, C3 route rates fell due to an influx of ballasters. Iron ore futures also declined following China’s policy support announcement.
- Capesize rates from Brazil to North China have dropped below $24/ton. Panamax rates to the Far East remain high, while Supramax and Handysize rates show varied trends.
Brazilian iron ore shipments to China increased in recent months, but July freight rates dropped due to a rise in ballasting vessels. Iron ore futures fell following China’s economic policy changes. Dry bulk freight rates are mixed, with Capesize rates declining and Panamax rates staying strong. Port congestion in China has risen across all vessel segments, hitting yearly highs, reports Break Wave Advisors.
Iron ore shipments
In recent months, Brazilian iron ore shipments to China have shown a significant rebound. Following a notable drop in the first quarter, the monthly volume of iron ore exports from Brazil increased steadily through May, June, and July. In July, there was a 13.4% year-over-year rise in the quantity of iron ore sent to China. June also saw a 4% increase compared to the same month in 2023. This uptick in shipment volumes reflects a positive trend for Brazilian iron ore exports.
Despite this growth in export volumes, the freight market rate for the C3 route from Brazil to China experienced a significant decline in July. The drop in rates is attributed to a surge in the number of ballasting vessels in the South Atlantic, which peaked towards the end of July. This increase in vessel count has exerted downward pressure on freight rates. The upward trend in ballasters began in late June and mirrors a similar peak observed in early June, as noted in our Dry Weekly Market Monitor for Week 23, 2024.
On a broader scale, the iron ore market has been influenced by recent economic policies announced by China’s Politburo. The top decision-making body, led by President Xi Jinping, has pledged to enhance policy support to stimulate economic growth by boosting domestic consumption. This move aims to address the challenges posed by external changes, weak domestic demand, and the transition from old growth drivers. However, these developments have contributed to a further decline in iron ore futures. On Tuesday, the September iron ore contract on China’s Dalian Commodity Exchange (DCE) fell by 2.77%, closing at 756 yuan ($104.14) per metric ton. Similarly, the August iron ore contract on the Singapore Exchange dropped 3.08% to $98.75 per ton, its lowest level since April 8.
The dry bulk freight market
In the dry bulk freight market, the trends for various vessel segments have shown notable variations. For Capesize vessels, freight rates for shipments from Brazil to North China have dropped below $24 per ton. This decrease has reduced the annual increase from 34% in the third week of July to 17% compared to the same week last year. Conversely, Panamax vessel rates from the Continent to the Far East have remained above $40 per ton since early July, reflecting a 28% increase year-over-year.
Supramax vessel rates on the Indo-ECI route have demonstrated a firmer momentum since late June, with rates at $11 per ton, marking a 30% increase from the previous year. Handysize freight rates for the NOPAC Far East route have been stable for the past ten weeks, holding at approximately $36 per ton, which represents a 35% increase compared to rates from a year ago.
In terms of ballasting trends, the Cape SE Africa market saw a significant rise in the number of ballasters, reaching approximately 134 vessels by the end of July. This represents an increase of about 40 vessels from the low point observed four weeks earlier. The Panamax SE Africa market experienced a decline in ballasters from around 170 vessels in late July to approximately 140, suggesting a potential stabilization. In contrast, the Supramax SE Asia market saw a decrease in ballasters below 90, falling below the annual average for early August. The Handysize NOPAC market also reported a decline in ballasters, reaching its lowest level in over a month.
Finally, the outlook for dry tonne days has shown an upward trend, particularly for larger vessel segments. Capesize tonne-day growth has increased from its low in week 23. Panamax growth has also improved since the third week of July, although future stability remains uncertain. Supramax growth has been positive, showing improvement from a low point in week 21. However, Handysize tonne-day growth has reversed, indicating a potential downward shift for early August.
Port congestion
Port congestion in Chinese dry bulk ports has continued to rise, reaching its highest level of the year by the end of July. Capesize congestion held steady above 130 vessels, with a significant increase of 16 ships compared to the end of week 19. Panamax congestion rose to 270 vessels, an increase of nearly 10. Supramax congestion remained above 330, up by 35 vessels. Handysize congestion also increased to around 200 vessels, marking a rise of nearly 20 from the previous week.
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Source: Break Wave Advisors
