Markets tending to firm up once again

Markets tending to firm up once again
Published: 30 March 2006

Tension mounted last week between iron ore suppliers, particularly Australia, and their main client, China, which does not help to clear the view about which direction the market could take for the rest of the year. However, despite these uncertainties, dry bulk freight rates are still on average well over the maximum levels reached in the pre-2003 period. Let’s say hopefully because in the meantime ships’ costs and values have also strongly progressed.

In this respect, this week the secondhand market has revealed that some owners remain optimistic about the future with a handful of Capesize newbuildings with delivery 2006-2007 sold between US$62m to US$64m apiece.  These rather “prompt” ships (compared to newbuildings) have seen their prices overtaking newbuilding ones as the earliest slots are now for 2009 delivery with prices around $60m. Just for reference, the value of a modern Cape on the second- hand market three years ago, before the “boom”, was just above $30m!

The Baltic Panamax Index gained another 31 points on Friday to stand at 2525. Rates remained firm in both basins despite the lack of fixing and sentiment remains positive with a shortfall of spot tonnage, especially in the Atlantic. Short period rates also remained firm for large modern types at US$19,500 per
day.

Still a lot of activity in Indian Ocean/ Pacific with rates continuing to firm up. For instance a Supramax grabber has been reported US$27,500 for Paradip to China (iron ore fronthaul Pacific) when similar size has been reported US$22,000 for trip back China to India via Indonesia with coal.

Therefore period rates moving up also (at least for 1 year) for instance a 56,000 dwt built 2006 reported at US $17,400 for 1 year (with an interesting delivery Kosichang) and Cosbulk have fixed sevewral Supramax vessels last week out of Pacific and Atlantic from short period to 18 months (‘Navios Appolon’ 52,000 dwt built 2000 delivery West Africa April for 17/19 months at US$15,900).

Spot Atlantic rates are moving up also with more activity in all areas. For instance overaged 37,000t vessles have been reported at US$13,000 for Caribs via Brazil to West Africa and modern 28,000t bulkers now talking this level for tct US Gulf/NCSA to Continent. A modern 51,000dwt ship has been reported delivery spot US Atlantic to Continent at US$15,000 which is still far away from Pacific rates and there is still a real mixed feeling regarding the evolution of the market on
a medium/long term.

Source: Barry Rogliano Salles, Shipbrokers, Paris