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Asian Capesize Bulk Carrier Glut Deepens

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March 1, 2015

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Asian Capesize Bulk Carrier Glut Deepens

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Rates for cape size bulk carriers, which are close to six-year lows, could show only slight improvement next week as the glut of available tonnage may outweigh any uptick in chartering after the end of the Lunar New Year holiday in China, brokers said.

“The capesize market is not going anywhere before next week or the week after,” said one Singapore-based ship broker on Thursday.

“The cargo volumes are not there. Charterers come in and fix one or two ships but it’s not enough to do anything for the market,” the broker said.

The big three Australian miners – BHP Billiton, Rio Tinto and Fortescue Metals Group – were all active this week, chartering seven capesize ships to haul iron ore from Australia to China, according to Reuters freight data.

But with more than 50 capesize vessels available for charter between China and Singapore, the market is over-tonnaged, the broker said.

Current charter rates are the equivalent of around $3,500 per day, the Singapore broker said. That is less than half daily operating costs of $7,300 per day for capesize ships, according to accountancy firm Moore Stephens.

Charter rates for the Western Australia-China route were steady at $4.40 per ton on Wednesday, virtually unchanged in the last 10 sessions. That is near the level of $4.12 per ton reached on Jan. 12, the lowest since December 2008.

Rates for the Brazil-China route showed a slight gain to $10.45 per ton on Wednesday, after remaining flat at around $10.20 per ton since Feb. 18. But this is still close to $9.65 per ton hit on Jan. 9, the lowest since January 2009.

Freight rates in the smaller panamax market should continue to climb next week as Chinese charterers return from the holiday, a Singapore-based panamax broker said.

Rates for a panamax transpacific voyage rose to $4,063 on Wednesday due to a rebound in cargo volumes. Rates were higher at around $4,500 on Thursday, the panamax broker said. This is a 63 percent gain since Feb. 5 when rates were down to $2,743, the lowest since January 2009.

Freight rates for smaller supramax bulk carriers climbed this week to around $6,000 per day for a round trip to the west coast of India, against $5,000 per day two weeks ago, Norwegian ship broker Fearnley said in a weekly note on Wednesday.

The Baltic Exchange’s main sea freight index closed up at 524 on Wednesday, against 509 last Wednesday.

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