The smaller-sized bulk carriers are gaining momentum, with rates pushing past $30,000 per day, says an article published on Lloyd’s List.
Baltic Exchange edged up
SMALLER bulk carriers are continuing to gain momentum as strong demand for commodities and fleet inefficiencies lead to tonnage tightness. The average weighted supramax time charter on the Baltic Exchange edged up to $32,395 per day at the close on July 30, a gain of 5% from the week before, while handy sizes inched up 3.1% to $31,676 per day.
Both segments outperformed the Panamax market, which slid below $30,000 for the first time since June 11, closing at $29,734 per day, while a sudden leap in capesizes saw earnings hit $35,713 per day.
Supporting the freight rates
An operator in Hong Kong said that China was back with plenty of cargo demand for different minor bulks, which has been supporting freight rates for the Pacific region. Coal cargoes from Indonesia to China remained attractive, although due to the recent covid lockdowns, some disruptions were seen.
Rates fixed
The Black Sea and Mediterranean regions were “full of life” with a lot of inquiries from the market, but the major concern now was the reduction in available tonnage. East Coast South America was also “on fire, with huge demand” for both supra and handies, with vessels being fixed at rates as per the destination.
“It is one of the reasons why charterers are ready to pay more money to get the fixture done as soon as possible,” he said.
The Baltic Exchange said it was “a week of positive gains as sentiment remained strong in many areas, although it was a gentler push”.
Inboxes carried by handies again
Demand from the Mediterranean kept rates solid, with an Ultramax said to be fixed from Turkey to Nigeria via the Black Sea at the $50,000 per day mark. Most other fixtures were in the $30,000-$40,000 per day range.
A broker said that with container port congestion becoming more of an issue, a number of dry cargoes, namely agri-products, which would be carried inboxes were again being carried by handies, especially for Chinese port deliveries.
Freight rates boosted
In addition, building construction material demand was very strong globally, as countries increased spending in a post-Covid recovery phase. According to brokerage Braemar ACM, fleet inefficiencies caused by the pandemic such as quarantine requirements and diversions for crew changes boosted freight rates.
A key driver for the supramax market has been steel trades, which have benefited from regional imbalances, it said in a recent note. But the unwinding of these effects could be a risk for freight further out.
Comparative growth from January to June
The brokerage expects China’s steel production growth to slow to 8.7% in the last six months of the year compared with 11.5% growth from January to June. The total output gain of 10% in 2021 could be slashed to 3% growth next year as the economy cools and steel intensity starts to decline, it said, adding that further easing could continue in 2023.
Excluding China, where output grew by 17% in the first six months of the year compared with the year-earlier period, the recovery should continue, albeit at a slower pace, with production rising by 7.2% over July-December, according to Braemar. A pullback of 0.2% is expected in 2022 from the overall growth of 12% this year.
Increase in the coal trade
Coal trade is meanwhile expected to increase by 10% in the latter six months of 2021 after 3.6% growth to 673m tonnes in January-June, Braemar estimates, bringing the total year rise to 6.7%, as the reopening of economies required more electricity generation, while a general surge in energy prices was making coal more competitive.
Swift recovery expected
Braemar, which has a generally positive outlook for the dry bulk market, is expecting a swift recovery in trade in 2021. After falling by 3.1% in 2020, minor bulk trade surged by 11.5% over the last six months, with estimated volumes to rise by 10% over the remainder of the year, helping to keep rates for the geared ships at strong levels.
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Source: LloydsList
