Capesize bulk carrier rates in the Pacific and Atlantic basins have surged to levels not seen since September 2022.
The cost of iron ore freight on the bellwether west Australia to north China route jumped to $9.60/t on 19 September — its highest level since September 2022 — from a low point of $7.25/t on 24 August.
Australian Capesize rates have been driven higher by a rally in Chinese iron ore demand in August and September while higher exports of iron ore from Brazil and bauxite from Guinea have drawn vessel away from the Pacific.
Iron ore exports from west Australia in August rose by 2.2pc compared to the previous year to 75.2mn t, according to initial shipping data. So far in September, exports are averaging 2.44mn t/day up from 2.43mn in August but will total slightly less because of fewer days in September. This is slightly slower than 2.5mn t/d in September 2022 but Capesize ships are being increasingly drawn westwards by Brazilian demand, which has left Australian charterers with limited options and pushed rates to record levels.
Brazilian iron ore exports are on track to reach 39.5mn t this month, compared to 36.1mn t in September 2022, according to preliminary data, having surged in August 2023 to their highest level since Global Trade Tracker (GTT) data began in 2002. This has helped drive the key Tubarao to Qingdao rate jumped to $22/t — its highest level since April 2023.
Bauxite has also emerged as a key drive of Capesize rates as Guinea's bauxite exports jumped by 30pc on the year in the first half of 2023 on the back of a recent mine capacity expansion and a comparatively dry rainy season. The exports also became a key driver of Capesize freight rates, absorbing a number of vessels eagerly needed in Brazil and pushing rates up.
On top of this, Russian coal companies are adding to demand for Capesizes in the north Atlantic as it is cheaper than chartering smaller Panamaxes which are busy carrying record-high Brazilian crops. This is the case even in Ust Luga, where Capesize vessels must be loaded under their total capacity because of draft limitations.
Capesize freight has further been supported by a $30/t jump over the last two weeks in Singapore bunker fuel prices to around $670/t. Bunker prices have generally followed oil prices higher as Saudi Arabia and Russia extended their additional crude supply cuts for another three months until the end of this year.
