15-12-2022 Capesize bulker market reaches two-month high as iron ore activity improves, analyst says, By Michael Juliano, TradeWinds
The capesize bulker market leapt on Thursday to its highest mark in nearly two months. The Baltic Exchange’s Capesize 5TC set of spot rate averages across five key routes skyrocketed 21.6% on Thursday to $17,374 per day, exceeding $17,000 for the first time since it hit $17,175 per day on 21 October. The 5TC received a boost from average spot rates for two iron ore capesize routes improving significantly since Wednesday. The average spot rate for the C10 transpacific roundtrip voyage from Australia to Asia spiked 21.3% to $14,005 per day on Thursday, while the C14 transatlantic roundtrip voyage from Brazil to China jumped 20% to $13,650 per day.
“Increased spot iron ore activity this week out of both Australia and Brazil has supported the shipping market,” Jefferies analyst Omar Nokta wrote in a note on Thursday. He also noted that Chinese steel prices have risen steadily since late November and spot iron ore prices have rebounded from a November low of $80 per tonne to $110 per tonne this week. These upward trends have occurred as China relaxed its zero-Covid policies in an effort to jump-start its ailing economy.
The higher spot rates are also due to tight supply in the Atlantic basin, said John Kartsonas, founder of Breakwave Advisors, an asset management firm that offers a dry bulk exchange traded fund. “The capesize Santa Claus rally is here, right when everyone turned bearish for the first quarter of the year,” he told TradeWinds. “That means higher rates in the short term, but also the chance of a stronger than previously expected beginning of 2023.”
But one broker gave a contrarian view, describing Thursday’s 5TC spike as just “end-of-year jitters” that will not last, given that many nations are facing a recession. More importantly, he said Covid-19 is running rampant throughout China.
Giuseppe Rosano, founder of UK broking house Alibra Shipping, told TradeWinds: “Covid in China is out of control and they are keeping things as quiet as possible. I have friends living there and painting a very different picture. Staff are all working from home and everything is slow.”