Spot rates for capesize bulkers have reached their highest point in three months as fixtures for iron ore deliveries from Brazil to China escalate amid tightening supply. The capesize 5TC, a spot-rate average weighted across five key routes, jumped 5.1% on Thursday to $38,217 per day, according to the Baltic Exchange. Higher rates for the benchmark Brazil-China round voyage provided the greatest support, leaping 6.5% to $37,519 per day.

“There is definitely more activity out of Brazil while vessel availability is tightening for the next month,” John Kartsonas, founder of asset-management advisory firm Breakwave Advisors, told TradeWinds. “The only relative outlier is the North Atlantic market that is still lagging behind versus the other key markets.” He reiterated his forecast for capesize spot rates averaging above $40,000 per day, especially with backing from higher panamax and supramax rates. “Overall, things are looking up for the large ships, and once again the seasonal upturn of early- to mid-August is proven right,” he added.

Firm spot rates out of Brazil are boosting capesize rates, but iron-ore demand may fall if China lowers steel output, said Sevi Katemoglou, founder of Greek broking house EastGate Shipping. “Chinese authorities are making concerted efforts to rein in the country’s major steel mills’ output so that demand for iron ore is controlled and the commodity’s price rally somewhat tamed,” the shipbroker told TradeWinds. “It remains to be seen whether this strategic approach will manage to actually distort the supply-demand fundamentals for iron ore.”

Capesize spot rates are also benefitting from plenty of enquiry in both the Atlantic and Pacific basins as well as port congestion off China, said Rebecca Galanopoulos Jones, research analyst for London broking house Alibra Shipping. “I think there are a few factors at play here,” she told TradeWinds. “Sentiment for this market is positive going forward, supported by the futures market, which is looking pretty strong for the remainder of 2021.”

Capesize spot rates may also be getting further support from US coal exports, which skyrocketed 71% year-over-year in June to 7.1m tonnes, according to Kepler Cheuvreux. The spike, driven by China’s continued ban on Australian coal, is boosting spot rates for both capesizes and panamaxes, Katemoglou said.

The panamax 5TC gained almost 1% on Thursday to reach $31,939 per day. “China … is now sourcing the commodity from farther destinations such as the US, South Africa and Colombia, therefore increasing travel distances and tonne-mile demand,” she said. “At the same time, Australians are selling their coal stems also to farther receivers in India, South Korea and Japan.”

Kartsonas said the higher US coal exports, mostly caused by the 2020 US-China trade deal, is having an impact on capesize rates, but only marginally. “It definitely draws ships, but these are smaller capesizes primarily due to draft restrictions,” he said.