The dry bulk shipping market has softened across most segments this week, with Capesize and Panamax vessels facing downward pressure due to cautious sentiment, thin cargo inquiry, and an oversupply of ships. The outlook for these larger vessels is now bearish, with key indicators pointing to further downside risks. In contrast, the Supramax and Handysize markets have held up slightly better, though the recent firm momentum has stalled.
Capesize Market
The Capesize market has weakened in both the Pacific and Atlantic basins. In the Pacific, rates for the key C5 route (Western Australia to Qingdao) have fallen to around $10.00, while in the Atlantic, a growing number of available vessels and a lack of demand have pressured the C3 route (Brazil to China) despite owners’ efforts to hold rates in the mid-$24,000s.
A few factors drive this bearish sentiment:
- Weakening Chinese Steel Mill Margins: Profitability has turned negative, suggesting a reduced appetite for iron ore.
- Contango in Futures: The near-month iron ore futures curve is in contango, which typically indicates expectations of lower prices in the future, signaling further downside risk.
- Cooling Coal Markets: Demand for coal has also slowed, removing another key pillar of support for the market.
While iron ore imports to China remain strong, they have eased slightly, and the recent increase in bauxite exports from Guinea isn’t enough to offset the overall negative sentiment.
Panamax Market
The Panamax market has also entered September on a softer note, with rates struggling to gain momentum in both the Atlantic and Pacific basins. In the Atlantic, a thin cargo list, particularly from East Coast South America (ECSA), has given charterers the upper hand. The lack of transatlantic and front-haul demand has kept rates under pressure.
Similarly, in the Pacific, an oversupply of vessels combined with limited demand from Australia and the North Pacific has pushed rates steadily lower. Despite some ships ballasting to the West, the tonnage overhang remains the dominant theme, making it difficult for owners to resist pressure from charterers. The general outlook is weak, and the market is expected to remain under strain.
Supramax Market
In contrast to the larger segments, the Supramax and Handysize markets had a positive run in previous weeks, buoyed by steady demand from the U.S. Gulf and a balanced sentiment in the Atlantic. However, this momentum has stalled.
- Supramax: The market has turned softer as a slowdown in US Gulf inquiry and an increase in prompt tonnage in Asia have created an imbalance.
- Handysize: This segment has held a more positive tone, with sentiment remaining firm and conditions balanced in both the Atlantic and Asian basins.
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Source: Fearnleys
