Rates still being held down

Rates still being held down
03 February 2006

Is it the start of a new merger wave? Many things tend to prove that our dry bulk markets have already entered into an M&A cycle. This state of facts is even reinforced by the downward trend recorded on the freight markets since the early days of this year. On the steel mills front the battle has already been engaged with the now famous and long lasting ThyssenKrup vs Arcelor for Dofasco story. In China the giant Baosteel has signed a wide cooperation agreement with another domestic producer Manang including “research and development, technological innovation, marketing, and purchase of raw material and fuel”… A similar consolidation process is on its way among Chinese coal producers with the announcement this week of a joint venture initiated by two top coal producers Shenhua Group and Ningxia Coal Group which will produce 80Mt of coal by 2008, and over 100Mt by 2010. The shipowning community has not so far been affected too much by this trend but in the case of a further and longer fall in rates it will not be long before hearing such stories.
  Last week, the Panamax market kept going down on the back of a lack of enquiries in both basins. However, there was some more fixing activity in the Pacific but at low rates. US Gulf has been quiet as far as orders are concerned. As a result, Transatlantic r/v have now been valued under at just under US$13,000 per day. Backhaul and Pacific r/v are now in the low US$14,000 p/d. In this context, needless to say that period activity was reduced except for a 3-5 months period fixture which was reported at US$17,500 p/d. Modern 75,000 dwt was fixed for around 1 year at US$16,500 p/d.
  Commodities fundamentals are positive but the Chinese New Year seems to be calming down any attempted upward pressure. Chinese New Year seems to be calming down any attempted upward pressure. The Far East market continued to drift downwards this week. Supramax achieved rates in the high US$17/18,000 per day for local employment, while tess 45 found its way into the high US$15/16,000 per day. Considering the weaker Atlantic, owners were not eager to fix trips back. There the situation went from bad to worse with almost no US Gulf/USEC orders. Despair ships were being seen on ballast to South America, which is already flooded by tonnage on ballast from the Med or West Africa. All sizes were affected, but the older handies were hit most particularly. Tess 45 types were fixed in the US$13,500/14,000 per day region for transatlantic r/v. Supramax achieved US$15,000 per day. In these conditions some are re-appraising the period market. But it looks more or less obvious now that not much will happen until after the Chinese New Year.
Chinese New Year seems to be calming down any attempted upward pressure. 

(source Barry Rogliano Salles, Shipbrokers, Paris).



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