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Sunday, April 1, 2001

ANALYSIS: Asia Capesize Rates to Firm as Owners Resist Downward Pressure





1 April 2016

ANALYSIS: Asia Capesize Rates to Firm as Owners Resist Downward Pressure
Photo: Shutterstock/Volodymyr Kyrylyuk

By Keith Wallis

SINGAPORE, April 1 (Reuters) – Freight rates for large capesize dry cargo ships on key Asian routes are set to firm next week as owners resist charterers attempts to push rates lower, ship brokers said on Thursday.

That came as revenue from freight rate income remains below the cost of operating the iron ore and coal carriers.

“There is a lot of tonnage in the market available for charter, but owners are slowly resisting,” a Singapore-based capesize broker said on Wednesday.

“Owners are slowly pushing the numbers up. It’s as positive as it has been in recent times,” the broker said.

The broker forecast rates could climb to $3.10/$3.15 per tonne to charter a 180,000 deadweight tonne capesize ship to haul iron ore from Australia to China.

Capesize earnings are around $1,579 per day, less than daily operating costs of around $7,300, according to data from British shipping services firm Clarkson and accountancy firm Moore Stephens.

“Until we get a more stable flow of cargo it is difficult to see the capesize market really moving higher,” the Singapore broker said.

Owners of capesize ships have been hit by a drop in coal imports into China which are set to fall 8 percent to 150.7 million tonnes on an annualised basis this year compared with 163.8 million tonnes last year, according to Clarkson.

Iron ore imports to China are more resilient, estimated at 921.6 million tonnes this year, a 2 percent fall compared with 939.7 million tonnes in 2015, according to Clarkson.

The poor state of the sector has led to an increase in the number of delayed ship deliveries.

Some 28 capesize ships were due to join the global fleet in the first quarter this year, but delivery of 14 of these has been pushed back to later in the year or beyond, according to maritime data company VesselsValue in a note on Wednesday.

Capesize charter rates for the Western Australia-China route held around $3.08 per tonne on Wednesday, against $3.03 a week earlier.

Rates for the Brazil-China route were steady at $5.80 a tonne on Wednesday, compared with $5.82 on the same day last week.

Panamax rates for a north Pacific round-trip voyage fell to $3,850 per day on Wednesday, from $4,169 per day last week, as tonnage supply outpaced cargo demand. Rates have been falling since hitting $4,807 per day on March 14, the highest since Nov. 2, 2015.

Freight rates for smaller supramax vessels have slipped with rates below $5,000 per day for a voyage from Singapore to India, Norwegian ship broker Fearnley said in a note on Wednesday.

The Baltic Exchange’s main sea freight index rose to 414 on Wednesday, from 401 the same day last week. (Reporting by Keith Wallis; Editing by Anand Basu)

(c) Copyright Thomson Reuters 2016.

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