First signs of weakness?

First signs of weakness?
Published: 18 January 2005

After the very prompt reaction of the market, which started mid-last week, it now seems that charterers have disappeared from the charts! The end of last week was very quiet and rates started to feel the pinch of this absence. Some Capes and Panamax ships remain unfixed out of this short-lived rally but it is hard to believe that Asian charterers can stay away from the market for long. Despite this, the Atlantic market has remained rather balanced and has so far offered a better resistance to the downward pressure.









Handymax tonnage also suffered from a slowdown in the East but to a lesser extent than larger bulkers. Explanations for the nervousness of the market can also be found elsewhere. The major players of the dry bulk market, particularly steel mills, are not only worried about the freight rates but also about the results of their negotiations with their raw material suppliers. It is now not exclusively a question of price increases, as we said last week, but has become a question of availability, which is increasingly hampered by infrastructure bottlenecks all over the world (Brazil, China, Australia, South AfricaŠ).

A recent report stated that despite having reached some monthly export records, South Africa has not been able to repeat its 2003 figure for coal exports at 71mt, with only 68Mt for the full year 2004. These countries are multiplying projects and initiatives to improve their transportation and export networks but it will take a long time before these announcements become reality.










The Panamax market was sending mixed signals during last week. While the index rose steadily in the first half of the week, it lost most of what it had gained towards the end of it. No clear direction is visible, and most players now seem to be more at ease with a market that is either skyrocketing or falling like a stone, than with a market which is moving in less spectacular ways, and sending less clear signs.

In the Pacific, owners are hoping to another high before the Chinese Spring festival, but seem to be less optimistic now then beginning of last week. Nevertheless, period fixtures still hold firm, with LMEs earning about US$39,000 for 3-5 months, and charterers cannot expect to achieve a big discount for periods up to one year. Owners are holding still but signs of a softening of the market are coming out. A slowdown of requirements almost everywhere but in the South Atlantic pushed the operators to keep their vessels unfixed until the last minute in order to obtain eventually better rates.

Handymax chartered from the Pacific are still seeing numbers over US$30,000 for 2/3 legs dop. On the other hand, several vessels (Handysize andHandymax) had to ballast South from the Continent to reach much more sustained areas. Last week was pretty much a period of stabilization of the Handy market, a pause in an upward trend.

source: Barry Rogliano Salles, Shipbrokers, Paris