Higher freights expected this winter

Higher freights expected this winter
27 September 2005

By the end of the week, while dry bulk markets have started marking a pause  in the quite strong rise they’ve enjoyed over the last three weeks, players prepare themselves to further rise in freight rates as most indicators speak so far in favour of another hot winter. To reinforce this feeling China’s authorities have announced this week, just after the publication of enthusiastic growth figures for Asia as a whole by the IMF, that they see their economy growing 9.2 per cent in 2005 and expand again by 8.7 per cent in the first half of 2006! As we said last week the main concern for China is now to deal with such a growth and avoid overheating. Problems are not only arising in coal and ore supplying but also with grain production which is said in a report to be short of at least 15Mt this year. Farmers quit the land, acreage is shrinking, so that China will soon strongly rely on food imports. This may be another challenge for our shipping markets in the coming years.

Against high level of orders remaining from the previous week, the Atlantic market was pushed for early tonnage causing rates to continue   upwards - further fuelled by a flurry of period activity. However, with most market orders cleaned up and rising numbers of forward vessels becoming open, the sentiment weakened at the end of the week, a trend that may continue next week or so. Similar fundamentals governed the Pacific with plenty of requirements still to be fixed at the beginning of the week - the majors continuing to pay top dollar for prompt tonnage. This has apparently released the pressure and sentiment has reversed, and we expect this to continue this week with an increasing level of spot Panamax tonnage.

The market "stabilised" in a way last week with an overall increase of only 84 points of the BHMI. After the very nervous summer we had and before the high volatility expected till at least the end of the year, it sounded like a perfect timing for owners and operators willing to secure ships on period either in or out (depending on their views...). Certainly linked to the downtrend of the FFA market, several fixtures have been reported in this respect especially for modern Handymaxes.

Big players like Cargill took at least 3 vessels for 11/13 months at rates between US$17,400 and US$19,500. The spread between Handymaxes and Handysizes is still thin and it seems that smaller sizes are less exposed than Handymaxes to unbalance of supply between Atlantic and Pacific basins. The trend of the moment is definitely to take positions and anticipate 2006.
















Source: Barry Rogliano Salles, Shipbrokers, Paris

Published under Cement News