Have rates reached the bottom for 2005
It is certainly a bit early to be too enthusiastic but the gains recorded this week on the Cape market show that we have perhaps touched the bottom for this year. With China still rejecting the pressure exerted by the EU and the US to float the Yuan and still desperately tries to restrict credit to an overheating economy; raw material, energy and steel markets are confirmed in their forecasts of a tighter second half of the year. 
Mittal Steel tried this week to reassure the market against the current fall in prices and called for some more regulation in steel production to prevent the industry to be dragged to "to its old pattern of boom and bust". At the same time the IISI released its May production figures with the comment that "This is 10.3 per cent higher than for the same month of 2004" and that China was again the largest crude steel producing country with production of 29.7Mt of crude steel in May. This represents a rise of 37.5 per cent compared to May 2004"
In addition to these anticipations, the grain market could this year also weigh positively on demand for tonnage as we’ve learnt this week that China’s grain deficit could reach 25Mt this season and that crops in India and again China will badly suffer from dry weather, sending soybean future prices to 12-months high.
The Panamax market bounced slightly towards the back end of last week regaining much of the earlier losses. The average four time charter routes finished the week at US$19,358 after starting the week at US$19,063. A fresh injection of grain cargoes in the Atlantic was seized upon by owners of modern tonnage on early positions. As we anticipated last week, the Pacific found some support from fresh orders but we are already feeling a slight weakening effect as tonnage supply continues to build. There is little expectation that the market rise of last week will continue much further with little to point to a fundamental change of direction at this time.
The Handy market echoed last year souvenirs and took a somehow firmer stance. Let’s see whether this is sustainable since there remain some particularly weak areas. The Pacific / Indian Ocean illustrates that situation with large modern vessels getting fixed in the mid teens if not less. Trips back are still paying in region of US$13,000 for larger ships and down to US$10,000 for future 32-Types.
The Atlantic is showing some signs of improvement in the Continent. Trips to US Gulf increased slightly to the upper/mid teens. T/C trip Far East are still being fixed in the US$30,000 whilst trips to East Med are being paid in the low 20’s. ECSA starts running out of steam. New orders will be welcomed to keep the momentum a little further.
Source: Barry Rogliano Salles, Shipbrokers, Paris
