Capesize Iron Ore Carriers Freight Recovers With Demand

The recovery in demand for Capesize iron ore vessels have rescued the freight rate out of the multi-year lows for the core routes and as of April 14, the rate between Brazil's Tubarao and China's Qingdao, for example, reversed up to $11.5/tonne from its 3.5 year-low of $9.2/t on March 30.

Similarly, the freight charges between Port of Dampier in Western Australia to Qingdao also recovered to $4.6/t by April 14 from its from its three-year low of $4/t on March 25, and it touched as high as $5.4/t briefly on March 31.

"The recent freight recovery has mainly been due to better demand firstly in the Pacific and then in the Atlantic when iron ore miners in Australia and Brazil have been shipping more iron ore out," a Singapore-based analyst commented.

The Pacific and Atlantic customers usually compete with each other for Capesize dry bulk carriers, the most popular vessels for such routes, according to him.

Capesize dry bulk carriers, usually at 100,000 deadweight tonnes and above, are most engaged to ship iron ore from the origins of Australia, Brazil, and South Africa, to the destinations such as China, Mysteel Global understands.

"Iron ore shipments from Brazil and Australia usually pick up in the second quarter when the adverse weather such as heavy rainfalls and cyclones are past," the Singapore source said, noting that China's iron ore demand may increase further too as China's industrial enterprises including the steel producers have been back to normality by now after the over one-month lockdown since late January because of the COVID-19.

China's demand for imported iron ore has, in comparison, fared well so far this year despite the pandemic, as the import volume grew 1.3% on year to 262.7 million tonnes for the first quarter, and over March 2-April 14, Mysteel's SEADEX of 62% Australian fines was rangebound at $79.95-91.65/dmt CFR Qingdao, as against $83-95.9/dmt a year ago.

Recent freight recovery for the Capesize dry bulk carriers, however, does not mean oversupply is no longer an issue in the long run, the Singapore analyst warned, saying, "new Capesize vessels, being a core model in the shipment, will continue to be delivered, and the market will always be under the pressure of overcapacity."

Shipowners had been into a frenzy of ordering new Capesize dry bulk vessels since around 2007 on the anticipation of the growing demand for such carriers amid global trade of metallurgical and agricultural products, and the lifespan of a carrier usually ranges 10-15 years, Mysteel Global understands.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.