Capesize rates have seen further declines as Brazilian iron ore volumes continued to lag and congestion was seen easing. The average weighted time charter on the Baltic Exchange closed on July 5 at $17,283 per day, down 12% from July 1 and 31% lower than June 20. The spot rates, which have been on a general downward trend since towards the end of May, are trailing the levels seen at this time last year. Capesize loadings from key iron ore ports in Brazil were 21% lower from January-June compared with the year-earlier period, according to Lloyd’s List Intelligence data.

Research from Arrow Shipbroking shows that iron ore trading volumes have dropped by 27 MMT this year, with shorter ballasting distances increasing fleet efficiency. Unwinding congestion to historical averages was thus a drag on earnings, it said in a note. “While the fundamentals have weakened, the capesize market still has plenty of life left,” it said, adding that the upside potential, as the negative factors could easily reverse, was greater than the downside risks related to demand.

According to Braemar, economic sentiment has improved in China, with its manufacturing index back in expansionary territory at 50.2, while steel output showed signs of improving, with May at 96.6 MMT, the highest level so far this year. With an easing of Covid-19 lockdowns, the ship brokerage is thus optimistic that the country’s iron ore demand will continue to rise through the quarter and provide a lift to capesize demand. As iron ore failed to impress thus far, capesizes have been more involved with carting coal and bauxite cargoes, but bad weather could derail the trades going forward. Australia’s coal shipments could be at risk given a new weather pattern that may bring rains in the second half of the year, according to the country’s latest resources and energy quarterly report, though demand will remain strong as Europe’s sanctions on Russia’s material take effect from August. Guinea’s bauxite may also be affected by the upcoming rainy season.

The capesize forward curve has come under pressure in recent weeks on concerns about China’s property sector, according to US-based Breakwave Advisors, which has said it considers the recent sharp correction in freight futures as “almost complete, and we anticipate some much-needed improvement in sentiment”. It expects the strongest spot rates in the fourth quarter, rather than the usual third quarter being the peak for the year. “The considerable downside adjustment in the futures curve has been the main event over the last few weeks as spot rates have failed to rally to any substantial degree to justify the prompt futures premiums,” it said recently. “Market expectations for a strong third quarter had mainly reflected memories of last year’s impressive rally rather than any fundamental shift in market balance.”

As of July 4, August is priced at $28,000, while September is at $30,750, according to GFI figures. The third quarter is at $27,250, while the fourth quarter is not far behind at $26,750. However, both are $1,000 or more below the previous session’s close.