Capesize freight rates are being pressured upwards because of tight tonnage and an uptick in demand for the larger, ore-carrying bulker segment in the Atlantic basin, rebounding from last month's downtrend that dropped returns for many shipowners below operating expense levels.
Chinese demand for iron ore has been the primary driver behind the turnaround in rates, especially over the last week, according to shipbrokerage Banchero Costa. Iron ore cargoes headed to Asia-Pacific from the Atlantic basin served to clear tonnage in the Atlantic, helping to pressure transatlantic rates higher as well.
Transatlantic rates may also be rising to entice shipowners who currently prefer long-duration front-haul routes, as opposed to shorter transatlantic rounds, to hedge against the possible continuation of Capesize rate volatility in the fourth quarter.
Rates for Capesize bulkers making transatlantic voyages have jumped by 66pc to $17.10/t since 1 September, when rates fell to lows last seen in December 2020. Rates for front-haul voyages similarly rose by 56pc to $42.05/t in the same period after hitting lows last seen in March 2021.
Earnings for Capesize owners bottomed out at the start of September, with multiple shipbrokers reporting $0/day fixtures in the Atlantic as Asia-Pacific steel demand remained in a post Covid-19 lockdown lull alongside real estate sector investment skittishness. Shipowners who previously invested in sulfur-scrubbing technology managed to continue generating profits during this time, while many shipowners with less efficient vessels chose to layup their bulkers rather than operate at a loss.
When laying up a vessel, shipowners will need to choose "hot" layups — where the vessel remain at sea — or "cold" layups, where they are docked. Operating costs for a hot layup are higher, but allow the vessel to rejoin the fleet quickly if rates improve in the short term. The sharp rebound in Capesize rates was exactly that kind of improvement, and shipowners who chose hot layups have certainly rejoined the fleet since, yet tonnage in the north Atlantic remains tight for the time being.
