The reason behind capesize bulker spot rates’ downward trend as of late can be summed up in one word, according to brokers and analysts: volatility. The capesize 5TC, a weighted average of spot rates across five routes, has dropped 26% since 10 May to $31,429 per day on Tuesday, hitting the lowest level in a month. “My take on it is that the larger vessels carry a smaller range of cargoes and therefore are more prone to volatility and sentiment related to those cargoes or external factors such as geopolitical events,” Rebecca Galanopoulos Jones, research analyst for London broking house Alibra Shipping. She noted that the Baltic Capesize Index is still 159% higher than two years ago at 3,790 points, before the pandemic came into play.

The supramax 10TC improved 4.9% to $25,563 per day on Tuesday since 10 May, according to the Baltic Exchange. “The smaller sizes carry a much wider range of cargoes on a variety of routes and are therefore better placed to withstand any market fluctuations.”

“There will always be more volatility in the capes than the smaller vessels as the iron ore and coal trades are much more lumpy and controlled by China, Australia and Brazil,” Jefferies analyst Randy Giveans told TradeWinds. He said he expects capesize spot rates to rise in the coming weeks and months, especially if steel prices and production remain high. “We also expect the smaller asset to remain relatively firm as demand for agriculture and the minor bulks is steady,” he said.

“The longer these rates stay anywhere near these levels, the underlying asset values will continue to rise, and stronger net asset values will lead to increasing dry bulk equity prices.”

John Kartsonas, founder and managing partner of asset management advisory Breakwave Advisors, gave another word for the dry bulk market in general. “Well, the market is confusing to say the least, as I believe there are different forces in play versus traditional levels of demand,” he told TradeWinds. “I think the smaller sizes are by far the strongest, and that is affecting both sentiment for larger sizes but also some substitution effect for charterers that have the ability to jump to a larger vessel for a small difference in freight.”

He said that demand is not strong enough right now, however, to convince charterers to load cargoes into capesizes and panamaxes instead of the smaller ships. “Having said that, I do see quite a diverse loading patterns something we are not used to, and thus market seems more active,” he said. “It has to do with high commodities prices and that should be with us for a while.”