07-12-2022 China eases Covid-19 policy, raising hopes for capesize bulkers, By Michael Juliano, TradeWinds07-12-2022
The capesize bulker market may get a near-term lift after China implemented less restrictive Covid-19 rules to boost its struggling economy, according to a market expert. The new policy will allow people with mild or no symptoms to isolate themselves at home and will let people travel within the country without taking tests, Reuters reported. After announcement of the eased restrictions, the Baltic Exchange’s Capesize 5TC basket of spot-rate averages across five key routes jumped 6.2% on Wednesday to nearly $13,600 per day. “It seems this is a serious attempt to reopen the economy and most China-focused asset classes are reacting positively,” said John Kartsonas, founder of Breakwave Advisors.
He told TradeWinds that the loosened Covid-19 policy may have helped boost capesize spot rates on Wednesday because these bulkers carry ore that China uses for construction, but it may not be the only reason for Wednesday’s higher spot rates. “The physical market does look tighter than before, and although we are not shooting for the moon here, it seems to me that the chances of stronger rates near term are higher than those for weaker rates,” said Kartsonas, whose New York-based asset management firm runs a dry bulk exchange traded fund. “Although we are at the end of the year, all it takes is some bad weather or delays and the market can move up on that.” China’s relaxation of its Covid-19 policy may also give a lift to the capesize futures market, though seasonality may prevent that, Kartsonas said. “This is not a solution as all these are noise in the big scheme where we are entering a relatively weak period, but China reopening can certainly help offset some of the anticipated weakness in the first and second quarters of the year,” he said.
January contracts picked up $172 to reach $8,579 per day on Wednesday. February contracts gained $122 to achieve $6,179 per day. The Baltic Exchange did not report any capesize fixtures on Wednesday, but analysts said that there was talk of Australian miners BHP and Rio Tinto fixing capesizes for late December to send ore to China at freight rates between $8.45 per tonne and $8.80 per tonne. Capital Ship Management’s 179,000-dwt Amigo II (built 2016) was said to have scored a fixture at $8.55 per tonne, while Maran Dry Management’s 178,000-dwt Maran Guardian (built 2010) was tied to a deal at $8.80 per tonne.