New deliveries will probably influence rate trends

New deliveries will probably influence rate trends
Published: 09 September 2005

After eight months of already intense shipbuilding activity, the rest of the year could see almost the same pace of tonnage addition which means, more than one Cape size vessel delivered per week, nearly two Panamaxes added on the same weekly basis, three Handymaxes and an average of six Handies per month. So if Asian and especially the Japanese yards respect their contractual delivery schedule, the two intermediate sizes of dry bulk carriers would see a strong level of tonnage addition, which will definitely not be counterbalanced by demolition. Commodity trading figures are still in line with projections and no major change is expected from the demand side. There are still 22 Capes to be delivered before the end of the year. This week’s outlook will be highly reliant on the propensity of Panamax rates to decrease and become more attractive than Capesize.

As expected, events in the US Gulf disrupted the Panamax market in a more direct manner as a significant number of ships and cargoes were cancelled. Both Pacific and Atlantic decreased with Pacific trips to Japan giving up more than 20 per cent. As for Capesize, few period deals were witnessed last week. It is not clear whether this week will see a major change and many people hope a tightening of supply by the end of the month in both basins. However, positive sentiment driven by India’s iron ore back in the market is being questioned as some information about India’s possible limitations on export to support local steel industry is circulating. No implementation date has been specified. The aftermath of Katrina will decide how the market will react in the medium term.

The BHMI index went one way down in the last days after a somehow surprising and nervous bounce the week before. The Atlantic market was already in a fragile position with a relative oversupply of tonnage and the recent events in the New Orleans’ area should logically even more affect the market. Force Majeure declarations have been seen already and it will take days or weeks before one can deem the actual effect of this tragedy.

Indian Ocean and Pacific markets slipped down also even if the expected end of the monsoon season in India should eventually absorb the tonnage already in position to lift iron ores stems. Modern Supramax are today fixed around mid US$10’s per day for trips from India to China and Pacific r/v are still giving a reasonable US$20,000 approx to owners.
Source: Barry Rogliano Salles, Shipbrokers, Paris