Tuesday, June 21, 2011

Dry bulk market turns red again on vessel oversupply

The dry bulk entered this week on a negative turn where sentiment was mixed between the various ship types and markets,with Capesizes faring better than smaller vessels and finally edging ever so closer to the Panamax market, in terms of average daily earnings. During the previous months, the panamaxes earning more than their larger counterparts has been a typical “abnormality of the market”, on the back of higher supply of capesize vessels.
On the Capesize market, the report noted that “after a soft start to the week, rates picked up compared on the previous week with the Atlantic seeing a good recovery with rates going up, while Hedland-Qingdao also saw a small boost. There were also some signs of a pick-up in China coal demand with fixtures being quoted for longer haul routes and the market is also seeing a drop in demolition rates in the Indian sub-continent, signaling that the supply of tonnage going for scrap may now be taking its toll on prices” said BRS.
It is worth noting that Vale announced this week that its new ‘Valemax’ vessels would reduce its shipping costs by around 20-25%, and that it would ‘keep building as much as is necessary’. The company also declared ‘a few ports’ in China were ready to accommodate the vessels. Vale calculates its freight costs based on a 10 year average operating cost plus a good return on the capital investment for a basket of vessels including Capesizes and the new mega sized vessels. Vale admitted the ships would have greater benefit in the a harder market: “Today we have got the best possible market situation with high iron ore prices and low freight rates but we want to be ready for when the market turns."
As far as the Supramax/Handy markets are concerned, BRS mentioned that “the Far East remained unexciting with a definite lack of cargoes and plenty of ships in every position with the market weakened further. Another bleak area was India, where the monsoon has started hitting owners hard, leaving no alternative but to ballast either to South Africa or further away to ECSA or the Singapore area. South America saw a flurry of activity with a good number of fixtures to any destination, supported by sugar and grain exports. The transatlantic remained steady, with rates equating to mid teens for round voyages. - Hellenic Shipping News Worldwide

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