Spot freight rates for Capesize dry bulkers surged on 3 August and shipping analysts note the fundamentals of the sector were not as bad as the freight market had indicated in 1H15.
“Capesize rates rose 9% yesterday and stand now at USD17,162/day. The BDI (Baltic Dry Index) has now risen by 95% to 1151 from 589 at end of May, mainly driven by the Capesize segment. Cape spot rates are up by 301% in the same period,” said DNB Markets’ shipping analysts Niciolay Dyvik, Oyvind Berle, and Petter Haugen.
“We believe the improvement is driven by increasing Atlantic iron ore volumes (Vale reported an all-time-high 2Q15 production recently), also helped by low Chinese inventories (down 18% YTD, 26% YOY),” the analysts said in a market report emailed to IHS Maritime.
“In our opinion the dry bulk segment was never oversupplied to the extent one should believe by looking at the spot rates (1H15 Capesize rates averaged USD4,591/day),” they pointed out.
A decline in Chinese coal imports has been blamed for the recent prolonged weakness, but as the 90 million tonnes of annual decline in Chinese coal trade equals only to a 2% loss of demand,” they noted.
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Rising coal imports to India combined with high pace of demolition sales that have removed 20 million dwt, or 2.6% of the dry bulk fleet being scrapped so far this year, have helped the market, they said.
This was also highlighted by Erik Nikolai Stavseth and Kurt Waldeland, shipping analysts at Arctic Securities in Oslo. “We estimate that close to 19 million dwt was scrapped in 1H15 – an annual run-rate of around 38 million dwt. Owners demolished 1.8 million dwt in June alone, the lowest monthly figure so far this year,” they said in a market report.
“The decline in scrapping in June can partly be ascribed to the monsoon season and continued downward pressure on scrap prices. We still expect scrapping to reach all-time high levels in 2015, exceeding 40 million dwt,” they said.
“On the contracting side, owners have understandably been reluctant to place new orders. Following a very slow May, only one single vessel was ordered in June. July has started equally slow and we do not expect contracting to pick up near term. Increased scrapping, coupled with ordering coming to a complete halt, is paving the way for a gradual improvement of the supply/demand balance as we move into 2016,” the two Arctic Securities analysts concluded.
This post was sourced from IHS Maritime 360: View the original article here.