As dry bulk shipping markets yet do not seem to see the bottom of their diving trip, most industry players still analyze this situation as a short term correction and remain confident on the long run. ThyssenKrupp and Mittal both say that steel prices will remain lower at least for 3 to 5 months and expect a rebound before the end of the year. Europe, United-States and China have so far been reducing their inventories, which will reinforce the upswing of prices when rebuilding time will start.
However, with the Chinese government pushing hard for a consolidation in its steel industry, at the same time turning off the credit tap and being pressed by the G8 to reform its foreign exchange policy, raw material markets have certainly lived their best time during the past two years. At least industrials hope that this context will bring ore, energy and shipping costs back to "reality", to preserve their margins.
Further steep falls during last week with first signs of bottom out mid last week, but then, down again at the end of last week, maybe also prompted by certain Asia based operators fixing prompt and forward cargoes well below the so-called market and FFA values. Still many ships around including ballasters but the cargo list increasing as well.
As predicted, the Panamax market fell last week, wiping out the previous weeks increases with the average four time charter routes losing US$3,000 at the close of business on the 10th June with no immediate end to the drop in sight. Some fresh orders are coming on the market, but positions are continuing to build up in both East and West putting rates under further pressure. The negative sentiment is being further fuelled by charterers ever decreasing evaluations which owners are resisting.
The underlying fundamentals are still pointing towards a continuing downturn.
The Handymax market continued to go down. Both Pacific and Atlantic were being effected. Little business emerged in the Far East giving little hope of a rebound in the near future. The pace of newbuilding deliveries does not fade away and rates are under pressure. Modern units get rates in the low to mid 20’s depending on position and size for S.E. Asian employment. The Indian Ocean is all but exciting. Employment opportunities are low and ships ballast towards South Africa. The Atlantic offered some kind of resistance up until now but it seems now that the gap between the two basins will slowly but surely vanish. The hopes now rely on the Continent and the Black Sea were in the light of abundant grain crops one should expect some activity throughout the summer.
Source: Barry Rogliano Salles, Shipbrokers, Paris