Upturn in market but will it last?

Upturn in market but will it last?
04 December 2006

Upturn in market but will it last?
The market has been desperately waiting for a clear signal since mid-summer this  year, and finally this week the Cape market  took the driving seat in an upward trend, not only with the BCI breaking the 6000  point barrier, but above all gaining 401 points during the last five trading days.
Panamax and Handies  followed the movement a bit later in the week. It is still a little early to say whether this firm trend is here to stay; but it shows at least that the rates remain prompt to react to any additional demand spotted on the market. Some massive deals/tenders, added to a still very high level of port congestion in Newcastle, Australia, have certainly played in the favour of this surge.

The week has also been quite rich on the newswire as the Indian Department of Commerce has finally disclosed its position regarding the request from the local steel
industry to cap iron ore exports, the department said that “ there is no need for impos- ing any ceiling on ore exports of any grade except the prevailing restrictions on high
grade iron ore of +64% iron content which is under canalisation and licence.”

A series of companies and official reports have been published this week, all con-
verging towards the same confident feeling either for the short, or the very long term. In the short term, we find financial analysts saying that port congestion in Australia, combined with China reducing its coal exports, will sustain the market in the coming weeks, given that the northern hemisphere demand is peaking for the winter. On the longer term, another report expects the Chinese boom to last at least another two years, and at the same time the Chinese authorities have announced a plan to “slash outdated iron & steel production”, which may play in the favour of the modern shore-based plants. Golden Ocean, the dry bulk arm of  the J. Fredriksen group has published slides in its quarterly report this week, also showing optimistic prospects for the supply/demand balance in the years to come.

The firmer trend, which started at the end of the week before, continued over the whole of last week with strong increases on all routes.

The Panamax market has been firming up last week. This time both basins took ad-
vantage of this rise, even if substantial gains and higher sensitivity could as usual be seen in the Pacific. Pacific rounds are now close to the US$40,000 level, as well
as backhaul TC trips. The Atlantic market hardly maintained the spread differential
between the 2 main basins, but improved to levels closer to US$29/30,000/day. Period
vessels (LME) for 12 months are now paid around US$30,000.

The HandyMax market remained firm all the week with small increases every days  both in the Pacific and the Atlantic. Supramax are fixing Pacific round voyages or short periods in excess of US$31,500. On the India to China iron ore route, a 56,000t newbuilding has been reported at US$33,000. Another 56,000t newbuilding has been reported fixed at US$28500 for 1 year ex-yard China. Rates remained steady in the Atlantic and although a very limited number of fixtures were reported, Handymax 42/45,000 dwt are still trading in the region of the low US$20’s ex-Continent. Activity is picking up before Christmas and rates are expected to increase. Modern Handies are still in very high demand in the Pacific, for instance a 27,000t built 1994 has been fixed last week at US$22,000 for 3/5 months.

 Source: Barry Rogliano Salles, Shipbrokers, Paris

Published under Cement News