- Although uncertainties still loom large due to the global pandemic, many countries are recovering economically and actively rebuilding commodity stockpiles.
- Expectations are that shipments will increase further in Q2, while freight rates will remain steady.
- Pent-up demand for commodities from grains to coal powered a surprisingly strong recovery in the dry bulk shipping market in the first quarter.
A Platts news written by Carina Li and Isaac Eio reveals that dry bulk freight market’s surprise strength extends into Q2.
Q1 performance in 2021
“I think the Q1 performance [exceeded] everyone’s expectations,” a Capesize ship-operating source said.
Capesize market
The Capesize market kicked off 2021 on a firm note with Platts Cape T4 index basis 0.5% sulfur marine fuel touching a year-to-date high of $23,908/day on Jan. 12 and averaging $14,367/day over Q1.
This far exceeded the $4,377/day averaged in Q1 2020, as well as the year-high at $8,897/day reached on March 31, 2020.
Supramax index
Platts APSI 5 regional Supramax index, which was launched in February, peaked at $24,863/day on March 24 after opening at $10,834/day, and stood at $22,358/day April 12.
Panamax index
The Platts KMAX 9 Panamax index hit a year-to-date high of $28,448/day on March 23 and averaged $18,276/day in Q1.
Robust iron ore prices, grain shipments and ballooning minor bulk demand, along with an imbalance in fleet positioning, firmed the dry freight market in Q1.
Interestingly, freight rates started to move first in the smaller ship segments.
Supramax and Handysize segments
The Supramax and Handysize segments saw sharp year-on-year jumps in cargo volumes of 9 million mt and 6.5 million mt respectively in January, while the larger Capesize and Panamax ships saw improvements in the range of 2.5 million mt and less than 1 million mt.
FFA market reflects Q2 optimism
An active freight forward agreement or FFA market is pointing to a stable to firm Q2.
Capesize paper market values for May and June jumped to over $28,000/ day April12, which some sources said will help drive up the physical market.
The Panamax and Supramax segments have also seen FFA markets spike this year in tandem with rising liquidity.
Brazil iron ore exports rise
Brazilian iron ore miner Vale raising its production guidance to 335 million mt for 2021, up 11.65% from 2020, the market expects shipping volumes from the Atlantic to increase.
The key impact will be when ton-mile demand out of the Atlantic increases from economic recovery outside of China just as the major iron ore importer imposes steel production cuts.
Shrinking orderbook
Newbuilding orders in the dry bulk segment fell in 2020 as the pandemic deterred fresh interest. Only around 200 ships were ordered in 2020, well below the 600 averaged over 2010-2019.
The net effect of a limited orderbook and growth in US grain sales paint a rosy picture for small- to mid-sized vessel segments in Q2.
However, in the past two weeks freight levels have softened slightly, with the Indian Ocean region proving a weak link for Supramax ships.
Secondhand market heats up
A busy secondhand sales and purchase market for dry bulk ships, along with a spurt in period chartering, is pointing to a steady freight market in Q2, market sources said.
Capesize operators and mining majors have snapped up tonnage for one-year periods in the range of $20,000-$25,000/day depending on the quality of ships.
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Source: Platts
