The capesize market is brimming with activity, reaching the highest levels in more than a decade. The surge can be attributed to an increase in iron ore volumes from Brazil’s mining giant Vale, mostly destined for China, combined with a shortage of tonnage. Port congestion, especially in China, has kept bulkers tied up for longer, leading to the limited vessel availability.

The average weighted spot time charter on the Baltic Exchange closed on Tuesday at $51,427 per day, the highest level since the new assessment which reflects the larger 180,000 dwt vessel began in 2014. The Baltic Capesize Index has risen to 6,206 points, the highest since November 2009. Freight Investor Services said that the market “blew through the psychological $50,000 mark” on Monday, reaching $50,708 per day, despite few reported fixtures in the physical market. “With congestion showing no sign of easing and tonnage still scarce off early dates in the Atlantic, it will not be a surprise to see further gains this week,” the brokerage said in a note, adding that there is talk of rates hitting $60,000 in the short term as Brazilian charterers with prompt cargoes face a tonnage squeeze.

One broker in Singapore said the market was very busy, with widespread sentiment pointing to further rate increases. With capesizes only now starting to ballast towards the Atlantic basin, the next one or two weeks could remain quite firm. Braemar ACM analyst Nick Ristic said that the inefficiencies caused by the coronavirus pandemic seemed to be getting worse, leading to extra wait times. That, combined with higher coal demand, was pushing up rates. A “classic positional squeeze in the Atlantic” has occurred, he said, in which Brazilian output is recovering but the ballasters list has dried up.

With iron ore prices still far higher than miners’ unit costs, the bull run could continue, and “even if the spike comes off dramatically over the next couple of weeks, the encouraging thing is that the market is still trending upwards”, he added. “We are not expecting any of the Covid-related factors to disappear any time soon.” Port congestion has indeed worsened as the coronavirus forces port closures in China. According to Lloyd’s List Intelligence data, congestion at northern Chinese ports, excluding Dalian, has led to an increase in bulk carriers, mostly capesizes, waiting in anchorage, now at 238 (above 15,000 dwt) totaling 16.4m dwt. Outside Dalian, there are now 19 ships, totaling 2.3m dwt, while off Shanghai/Ningbo, 207 bulkers totaling 15m dwt are waiting, the data shows. Off Qingdao and Rizhao, chronic congestion is building, with 129 bulkers of 1.6m dwt.

Demand is “very healthy” for the dry bulk sector, sustained by all the stimulus packages that pushed the global economy out of the Covid-led recession, said Banchero Costa’s analyst Enrico Paglia. On the other hand, the supply of new ships is limited, with just 55 capesize and very large ore carriers delivered so far this year, he said, adding that he expects a further slowdown next year after cutting in half its growth projection for this year versus 2020. China’s iron ore appetite has continued apace, with volumes so far this year at 682m tonnes, according to Ocean Analytics, citing Oceanbolt data. In 2020, imports reached 1.16bn tonnes. Imports from Australia totaled 453m tonnes in the year to date compared with 760 tonnes for full-year 2020, while Brazilian supplies reached 137.4m tonnes compared with 243.2m tonnes, the data showed.

Inventories at Chinese ports also have room for more product, with only a handful at maximum capacity, Tathya Earth data shows. The company’s inventory index, which uses algorithms to work out levels using satellite imagery, shows that China still has appetite for the steel-making raw material, providing further employment opportunities for bulkers. China’s steel production, however, declined in July for the first time this year, according to the latest from the World Steel Association. Output fell 8.4% to 86.8m tonnes versus the same month in 2020, bringing the year-to date figure to 649.3m tonnes, a gain of 8% over the corresponding period last year. Despite the weaker indicators out of China in recent weeks, the dry bulk market continues strong.