When freight rates are $31,000 to $32,000 per day for Capes, Panamaxes and Supramaxes we can put up with the fact that daily earnings of Handies are only $26,600 per day as of June 24.

It seems to be a strong defense that the head coach has fielded for the 2021 dry bulk season and one with lots of stamina. And while the pulse of most spectators in the stadium looks like the Capesize freight rates as they move sharply up and down and back up again, the CPR is provided by Doctor China, the permanent medicine person when games are played.

Chinese iron ore imports are up by 5.9% for the first five months year-on-year and soybean imports for the same period are up by 12.9% showing strength across the board. Brazilian iron ore, which is up by 20%, has supported the VLOCs and capesizes on the C3 from Tubarão to Qingdao. Still, it is not all long hauls as India has also grown its exports of iron ore to China, up from 15 MMT to 22 MMT, and it is not all rosy. Chinese coal imports are the weak link.

As a key player in the midfield, Chinese coal imports have been a stalwart for shipping demand for many years. First as a solid exporter, later – and for more than a decade now – as a steady importer. But since imports are down by 25% in the first five months of 2021 year-on-year, and increasingly come from Mongolia on trucks, or via short hauls from the Russian Far East on supramax and panamax ships it is not a positive development for shipping at all. The only soothing development is the occasional capesize load of coal from the Black Sea or the Baltic, which serves as another gentle Chinese reminder to Russia of ‘who’s your Daddy’.

After Australian imports have been sent off for foul play according to the Chinese referee, South Africa is back in play and the US too, not by a lot, yet enough to prove the point that the Chinese want to make – we have alternative sources ready to supply, we alone call the shots.

On the attack is the Norwegian businessman behind Himalaya Shipping. A man with a plan to raise more money any time soon (to pay for the instalments), as he proclaims the coming years of the bulk market to be as exciting now as the world’s most iconic mountain range. Splash Extra acknowledges that capesize spot earnings have indeed looked like a string of mountain tops in the past 12 months whereas the first half of 2020 was akin to river deep, and not mountain high.

Splash Extra believes that Himalaya’s eight Newcastlemax will be delivered in 2023 and 2024, preferably attached with two- to four-year spot market index-linked charters with an LNG-bonus attached.

As exciting as the Norwegian adventure seems, it may arrive late for the party, at least this years’ summer party that could be staged by a summer pick up in coal demand and an Atlantic basin shortage of available spot ships.

China’s National Development and Reform Commission (NDRC) has announced that it plans to build up around 100m tons of deployable coal reserves this year.

“It is extremely rare for the Chinese government to make statements on building up coal reserves, and this adds to our bullishness for the dry bulk shipping market and seaborne coal market,” commented Jefferey Landsberg, managing director of Commodore Research & Consultancy.

Precise details on the source of the reserves have not been released, but the NDRC has also stated it expects both domestic coal output and imports will increase in the near term. Research from Commodore shows China’s power plant stockpiles are down year-on-year by about 25%, while coal-derived electricity production this quarter has been rising year-on-year by approximately 10%. At the same time, domestic coal production has stayed under government-mandated pressure as accidents and deaths at coal mines have continued to occur in recent months.

Coal port stockpiles in China have also now fallen to the lowest level since February.

“Concerns for both summer and winter coal shortages have continued to intensify in China, and we believe substantial strengthening in coal import demand will occur very soon,” Landsberg predicted.

Strong demand for dry bulk commodities as economies recover from the global pandemic have helped to lift bulk carrier earnings, but it would be premature for owners to pop open the champagne just yet, according to shipping association BIMCO.

“Despite the current strength of the dry bulk market, fundamentally little has changed, with high demand primarily being driven by short-term factors linked to pandemic-related stimulus spending and stockpiling,” the group’s chief shipping analyst Peter Sand said. “This means that, even though volumes are currently strong and the orderbook relatively low, BIMCO is not holding its breath for the next supercycle to begin.”

“Whatever happens in the longer run, the strong start to this year has padded dry bulk owners’ and operators’ bottom lines, and with continued strong demand for many of the major dry bulk goods, this year looks set to be one to remember,” Mr Sand said.

The dry bulk market had a stellar start to the year, driven by agri-products on long-haul voyages, combined with higher iron ore from Brazil as Vale, the country’s largest miner, ramped up output following a dam breach in early 2019. Even coal volumes showed strength.

The first four months of the year had record-breaking volumes, with demand reaching 1.69bn tonnes, an increase of 6.1% compared with the year-earlier period. That is the highest ever start to a year, although it is slightly lower than the 1.72bn tonnes shipped in the final four months of 2020. Most vessel sizes were beneficiaries of the strong demand, with supramaxes topping the chart.

Demand for supramaxes increased by almost 11% in the January to April period versus the same time last year, while capesizes gained 6% and Panamaxes rose by 1.5%, according to BIMCO. Handysize demand however only grew by 0.1%.

Capesize earnings are set to have the best month of May since 2010, with an average of $36,536 per day, which is about nine times greater than the same month last year, BIMCO said. The last time average earnings were above $25,000 per day for a peak season was back in the fourth quarter of 2013.

So far this year, however, Capes have averaged $23,054 per day, based on Baltic Exchange data. Panamax earnings have meanwhile averaged $20,487 per day, while supramaxes were at $19,188 per day, and handysizes were at $18,274 per day.

On the supply side, BIMCO expects fleet growth at 2.4%, the lowest since 2016. So far this year, vessel supply has expanded 1.3% based on new ship deliveries of 16m dwt out of an expected 30m dwt and demolitions amounting to just 4.2m dwt. Ordering-wise, 92 new ships have been contracted to date, versus 111 in the same period last year. Panamax ships have proved to be the most popular with 44 ordered, according to BIMCO.

The capesize bulker sector is looking better on paper than in reality, but industry experts are still quite optimistic about the physical market. The capesize 5TC, a weighted average of spot rates across five routes, has slipped by 24% over the past seven days. On Tuesday it slipped again to $25,032 per day, down by 2.3% since the last assessment by Baltic Exchange panellists on Friday.

Advances, however, are being seeing in the freight-forward agreement (FFA) market. Current-month contracts settled 4.5% higher on Tuesday at $29,500 per day, and July FFAs printed 7% higher at $35,632 per day, according to Baltic Exchange data. September contracts were the other biggest winner of the day, settling 7% higher than Friday at $34,496 per day and boding well for the third quarter. Physical rates may improve, however, because of news that Chinese steel mills may boost their output, according to John Kartsonas, founder of asset management advisory Breakwave Advisors.

Reuters reported on Monday that city officials within Tangshan, which accounts for 13% of China’s steel output, discussed whether steel mills should be allowed to ease production cuts. The Chinese government in March asked steel mills in this region to cut volume by 30% to 50% to improve air quality.

Higher prices for steel, iron ore and other commodities may also elevate spot rates, Kartsonas told TradeWinds. Chinese steel prices have jumped 38.5% year-over-year and reached RMB 5,837 ($914.45) per tonne on Tuesday, according to the SteelHome China Steel Price Index. “Plus, the Pacific market seems to have stabilized, at least for now,” Kartsonas said of the capesize market. “The second quarter is tracking close to $30,000 per day, so I think historically that the third quarter has been better than the second and that is what the market is saying.”

Talk of Chinese steel mills ramping up output and higher commodity prices make it difficult to sell future contracts and have therefore driven the upturn in the freight derivatives market on Tuesday, according to Kartsonas. “Premiums are now quite high though, so spot prices need to turn up soon, otherwise I am afraid another correction in freight futures is around the corner,” he told TradeWinds. “Futures in general are heavily influenced by sentiment, and sometimes such sentiment can flow through to the physical market. It is early in the week, but the spot market appears more stable and maybe, just maybe, we are closer to a turnaround.”

Global iron ore shipments for May came in at 132m tonnes, up 9.3% from April, according to Clarksons data. Australian iron-ore shipments rebounded 8% from April to 79m tonnes in May following further maintenance. Volumes are expected to accelerate through June to meet companies’ 2021 guidance. Shipments from Brazil improved to 31m tonnes, according to Clarksons, marking this year’s highest monthly volume and should seasonally continue to grow throughout 2021. These positive factors have left Seanergy Maritime Holdings chief executive Stamatis Tsantanis quite bullish on the capesizes, having bought five of them so far this year. “We do not expect any slowdown of iron ore imports from China any time soon, and Brazil is increasing their exports,” he told TradeWinds.

He also expects that his pure-play fleet of 16 capesizes will also benefit from the IMO’s 2022 Energy Efficient Existing Shipping Index (EEXI) by forcing ships to slowsteam. “The mandatory speed reduction of 10%-15% will have the equivalent effect on the effective vessel supply,” he said, “All things being equal, the supply squeeze can have massive benefits for capes.”

George Soros and other world-famous investors put their money in shipping companies during the first quarter of 2021, regulatory filings show. The Hungarian-American billionaire’s investment firm Soros Fund Management spent $39.3m during the first quarter in acquiring Golar LNG’s 2.75% senior unsecured convertible notes, which are due next year. The filings showed he held 40.25m of the notes, which accounts for about 10% of the bond issue. Private equity firm Oaktree Capital Management also holds around $8.3m of the same bonds. Soros Capital was one of 11 institutional investors who took on new positions in Golar’s unsecured bonds during the quarter, while two others sold off their holdings.

Earlier this month, filings revealed that famed “Big Short” investor Michael Burry acquired stakes in shipowners Golden Ocean Group, Genco Shipping & Trading and Scorpio Tankers during the first three months of 2021, as TradeWinds has reported. Bill Miller of Miller Value Partners was another famous name who upped his shipping investments in early 2021. His investment firm added an extra 49% to its existing stake in Norwegian Cruise Line Holdings’ stock and held 3.87m shares at the end of the first quarter — a holding worth around $106.8m. Filings show that the investment now accounts for just over 3% of Miller’s portfolio.

Meanwhile, Canadian private equity giant Fairfax Financial Holdings has slightly increased its holding in Atlas Corp, the group that owns containership tonnage provider Seaspan Corp. Fairfax, which is led by Prem Watsa, who controls around half of the firm, bought just under 169,700 more Atlas shares during the first quarter. Its total stake in the boxship owner was worth $1.36bn at the end of the period — almost half of Fairfax’s portfolio.

The big names’ newly disclosed investments come at a time when private equity funds are selling down their stakes in US-listed shipowners or exiting their positions completely — a phenomenon that has been dubbed “Prexit”. Oaktree has sold off around one-third of its holding in bulker giant Star Bulk Carriers this quarter. This means that Star Bulk is no longer the largest investor in Oaktree’s portfolio. The shareholding had been worth around $572.6m at the end of March, which accounted for 10.7% of the firm’s portfolio, US Securities and Exchange Commission (SEC) filings show. The private equity firm, which is led by Howard Marks, has long been Star Bulk’s largest shareholder and backer.

Star Bulk was formed in 2014 through the merger of Excel Maritime Carriers and Oceanbulk, which was owned jointly by Oaktree and Star Bulk’s chief executive, Petros Pappas. Oaktree sold almost 8% of its shareholding in Eagle Bulk Shipping during the first quarter, leaving the firm with 3.9m shares worth a combined $140.4m. This means Oaktree now owns just over 31% of the Nasdaq-listed bulker owner — down by 2%. Oaktree also holds convertible bonds in Eagle Bulk, as well as in US-listed Ardmore Shipping, SFL Corp, Scorpio Tankers and Seacor Holdings. Its other long-standing shareholding — tanker company Torm — accounts for 9.2% of Oaktree’s investment portfolio and was worth almost $492m at the end of the first quarter.

Earlier in March, Eagle Bulk’s second-largest holder — GoldenTree Asset Management — sold more than 3.6m convertible notes in the company, generating more than $4m. GoldenTree, which is headed by its founder Steven Tananbaum, owned 24% of Eagle Bulk at the end of the first quarter, much unchanged from three months earlier. Bulker owner Genco has seen its top three shareholders reduce their combined holding in the company from 58% to 20% this year, as TradeWinds has reported. Centerbridge Partners, Strategic Value Partners and Apollo Management Holdings began selling their shares in December 2020. SEC filings confirm that Strategic Value Partners has completely exited its Genco investment, selling all of its 8.2m shares in the company during the first three months of 2021 — a stake that had been worth around $60.1m at the end of last year. The SEC filings also show that Apollo has reduced its Genco holding by 91% over the same time frame and had 399,651 shares by 31 March. Centerbridge Partners has reduced its stake in the shipowner by just under 20% since the end of 2020. Its holding stood at 6.29m shares — or 15.02% of Genco — at the end of the first quarter.

China’s warning that it will clamp down on “excessive speculation” in commodity markets caused prices to plunge on Monday, with iron-ore contracts hit hardest by the rout. But analysts have told TradeWinds that it will take more to meaningfully shift demand for bulk carriers. Pricing on the main iron ore futures contract fell by 7% on China’s Dalian exchange to CNY 1,049 ($163) a tonne on Monday, almost 20% down on the record high reached earlier in May. Support is needed from Chinese buyers of iron ore, without which prices will continue to fall, Derek Langston, head of research at shipbroker Simpson Spence Young, told TradeWinds. “Although further hefty price drops will be required before the higher end of the producer cost curve is threatened — as prices reached historically high levels in mid-May — buyers can afford to step back in the immediate term,” he said.

The most immediate effect of China’s crackdown on commodity speculation is being felt in the paper market for capesizes, according to Nick Ristic, lead dry bulk analyst at Braemar ACM Shipbroking. Research firm Navigate Commodities called the Chinese government’s announcement an attempt to “sooth the self-inflicted wounds caused by regular statements on steel capacity reforms”. These reforms have fuelled steel prices and margins, the Singapore-based firm said in a note to clients on Monday. This, it said, begs the question: “Have these [Chinese] government bodies achieved any fundamental industry restructuring, aside from creating unnecessary speculation and market volatility? The answer is no, not in the short term. In our opinion, allowing the ‘invisible hand’ to go about its business would have been the correct strategy,”

The firm said it has modelled a “modest” global supply-demand iron ore deficit in 2021, which it said is “not sufficient” to sustain prices of above $180-$190 per tonne for the commodity. It said it expects to see iron-ore prices of around $167 to $175 per tonne in the medium term, on the back of “robust” arrivals and shipments of the commodity during the remainder of this quarter. June 5TC contracts for capesizes had lost almost $2,500 in value by Monday afternoon in London, he told TradeWinds, “but this is still fairly muted compared to the plus/minus $5,000 days we’ve been having recently”.

Ristic thinks that China’s warning to markets should be viewed alongside other steps taken by the country’s policymakers to cool ferrous markets. “So far we’ve had the local [steel] production restrictions (which had the opposite effect) and the removal of the tax rebates on exports, but the latest moves against ‘speculative trading’ and a crackdown on mills that might be in breach of production restrictions seem to have had a much greater effect,” he explained. The catalyst for Chinese authorities may have been last month’s 6.8% producer price index, or PPI, figure, indicating that high steel and iron ore prices are being felt in the pricing of consumer goods, Ristic said. “It’s also likely that higher consumer prices for these goods are being masked by a relative fall in pork prices, which form a large portion of the basket of goods measured.” But it is not a given that that steel output will fall in line with these prices, Ristic added. “This is the thing that will dictate bulker demand in [the second half 2021] and so far China has had little success in reining in production,” he told TradeWinds.

Burak Cetinok, Arrow Shipbroking Group’s head of research, agreed that the effects on bulker markets — if any — will be felt further down the road. “We have seen similar attempts in the past where [Chinese] authorities intervened to rein in prices. After a surge in speculative activity in 2016, regulators tightened restrictions on domestic exchanges. Trading volumes collapsed and prices dropped,” he explained. “However, there is less evidence of major speculation at the moment — trading volumes have been within normal range recently. It seems to me that the tightness is primarily driven by strong demand and restricted supplies, particularly that of iron ore.”

Ristic said that bulker demand could be drastically affected if Chinese authorities continue to be more heavy-handed in the final six months of 2021. “It’s worth bearing in mind that China’s steel industry directly accounts for about half of employment for the entire dry fleet,” he said. Cetinok, meanwhile, expects Chinese demand for seaborne commodities to weaken later this year, but rather than a steep drop, he said, he expects stabilisation after a period of exceptionally strong growth. “We expect Chinese demand to cool later in the year as the stimulus gradually matures and the tighter property measures introduced earlier in the year start to weigh on construction activity,” he told TradeWinds. “It will probably be the fundamentals rather than the administrative interventions that will do the job for the policymakers.”

Research and consultancy firm Shipping Strategy —which is headed by its founder Mark Williams, ex-head of research at Affinity Shipping — thinks China’s warning will ultimately be a good thing for bulker markets. “The physical price has been rising due to increased demand for steel all around the world,” the firm noted in its Bulk Carrier Market Outlook, which was published on Monday. “In global construction markets, a ‘Shortage of Everything’ and rising profits are leading to an upswing in productive capacity, which we think will lead to increasing demand for bulk carriers as global supply chains for industrial raw materials and manufactures are stretched.”

China’s recent comments aimed at bringing down super-hot commodities prices may turn out to be a blessing for the dry bulk market. Remarks by the National Development and Reform Commission was seen as a warning to those taking large positions in the paper market for commodities ranging from iron ore to copper and steel, which had seen a bull run to record highs over recent weeks, according to Shipping Strategy. The signal to market participants “do not stop people from trading the physical, but rather to curtail volumes from the futures market, the effect of which may be to encourage people to buy more imported commodities, which will help push up freight rates,” the UK-based consultancy’s founder Mark Williams said.

While May has been a quiet month due to various holidays around the world, June and July may “roar back,” he said, adding that the second half of the year will turn out to be busier. The Baltic Dry Index could even breach 4,000 points, the first time in more than a decade, according to Mr Williams.     

US-based Breakwave Advisors said the biggest risk to the dry bulk rally is China’s intervention to cool the markets. The capesize segment appears to be “the least supportive and the most vulnerable” to China’s clampdown on sky-high commodity prices, relating mostly to its steel industry, which has seen sharp increases this year, it said. With more than 60% of demand coming from China, dry bulk remains highly dependent on the country’s imports, and any indication of a pullback will filter through to the dry bulk market in the first instance, it added.

“We do not believe that such an aggressive action will be beneficial for China, as prices will only increase further due to the limits in domestic production capacity for a lot of commodities. However, we cannot ignore such a scenario.” Global steel production rose 23% to almost 170m tonnes in April versus the same month last year, according to the latest statistics from the World Steel Association. China’s output increased by 13% to almost 98m tonnes.

Peter Sand, chief shipping analyst at the largest shipping association BIMCO, said commodities were feeling the pressure of inflation from extreme expansionary monetary easing, particularly in the US. “Higher commodity prices do not help anyone but the miners,” he said, although they cannot benefit hugely from the red-hot markets due to some supply constraints. The higher prices are not currently correlating to super-charged demand, he noted. Take iron ore, for example, which reached record high levels of more than $230 per tonne on the futures market, not because demand was strong, but because of lower availability.

There were also concerns of souring relations between China and its main supplier Australia. In terms of coal, Chinese electricity production from coal is higher at present, which bodes well for demand at least in the short-term, Mr Sand said. There may be less imports over time as domestic production rises and more renewables make up the share, which would be negative for the panamax and capesize demand, he added.

Spot rates for supramax bulkers are sustaining an 11-year high amid a surge in grain demand. The supramax 10TC, a weighted average of 10 spot rates across 10 routes, on Monday hit $26,712 per day, marking the third consecutive trading day that the asset class has attained rates above $26,000 per day.

The last time supramaxes reached that level was on 9 June 2010 when this Baltic Exchange average, which back then factored in only six routes, came in at $26,380 per day. Supramax bulker spot rates are getting a nice boost primarily from the high global demand for grain, says Jefferies analyst Randy Giveans.

“It’s a combination of strong minor bulk trade, huge buying from China for agriculture products and ongoing port congestion,” he told TradeWinds. “It is certainly a massive uplift from small vessel owners, especially those locking in very profitable 6-12 month time charters.”

China alone is expected to import 26m tonnes of corn during the 2021-2022 growing season starting in September, according to the USDA. That is up from 7.6m tonnes taken in during the prior grain year.

The then-supramax 6TC previously came above $26,000 per day on 1 October 2008 when it came in at $27,179 per day.

Despite breaking the $26,000-per-day barrier on Monday, brokers noted that supramax spot rates were off to a slow start this week. “With widespread holidays, a bit of a lethargic beginning to the week with limited fresh activity surfacing and brokers commenting that most at their desks were in collecting mode,” the Baltic Exchange said in its daily take on supramaxes.

Turkish shipowner Cebi Denizcilik has fixed its 57,318-dwt supramax bulker Cebihan (built 2009) to FastFreight for a voyage from China to India starting 27 May.

No shipping sector fared better than dry bulk in the US equity markets as the average shipowner ended Friday with a 8% one-week gain even as capesize rates slid more than 5%. So those looking for a simple correlation between the physical and stock markets might wonder what is happening.

But for Jefferies lead shipping analyst Randy Giveans, it is just another sign that dry bulk increasingly has its believers among investors. “Small asset classes are still on the rise, the FFA curve remains firm, and time charter rates are being fixed at strong rates,” Giveans said in an interview with TradeWinds. “And management teams are showing they are being good stewards of capital, net asset values keep rising, and investors are now more confident that this recent rally is more than just a flash in the pan.”

All that was good enough for dry bulk to lead the pack in a week when shipping shares gained 5.1% overall, once again outpacing the S&P 500 and the small-cap Russell 2000 index, which both lost 0.4%. “This is starting to sound like a broken record: another week of shipping outperforming the broader indices,” Giveans said.

Along those lines, US-listed shipping shares have now gained 66% year to date and 46% year over year. The dry trade saw double-digit gains from Diana Shipping, the top shipping performer overall with a 17% spike, and Genco Shipping & Trading with a 10% climb. Eagle Bulk Shipping and Navios Maritime Partners both surged 9%.

While dry bulk shares decoupled from the physical market, tanker shares were correlated with a 7% climb. “VLCC rates surged and sentiment improved following possible news around Iranian sanctions being lifted, with more to come this week,” Giveans said. Jefferies reported that average VLCC rates increased 60% to $10,064, while rates of the largest product tankers, LR2s, jumped 36% to $9,300. Frontline was the biggest individual gainer in tankers and second overall with a 13% jump after announcing it had swooped on six VLCC newbuilding resales for $566.8m, with founder John Fredriksen bullish on the market in comments to TradeWinds.

Frontline will gain the spotlight again on Thursday at it reports quarterly earnings. Scorpio Tankers, the world’s largest product tanker owner, led the clean sector with a 12% advance after another purchase of call options on the stock by president Robert Bugbee.

Every shipping sector gained ground, as did 27 of the 31 stocks under Jefferies’ coverage. Containership owners had another strong week with a 6% advance, led by Israeli liner operator Zim at 13%. LNG shipowners gained 2% and LPG carrier owners edged up 1%.

The dry bulk market is getting its strength from other commodities besides iron ore shipped on capesizes, according to an industry expert. The sector is being lifted mostly from corn and coal on the smaller ships, says John Kartsonas, founder and managing partner of asset management advisory Breakwave Advisors.

“China is buying corn like there’s no tomorrow,” he said during a chat with BTIG analyst Greg Lewis. “Corn imports today are by the far the highest we have seen in China.” China bought about 9.5m tonnes of US corn from the 2021-22 season so far this month, according to the US Department of Agriculture, Bloomberg has reported. The agency expects China to import around 26m tonnes from worldwide suppliers for the period that begins in September.

Kartsonas said atypical demand for other grains and coal are raising for sub-capesize asset spot rates, which in turn are driving up the entire dry bulk market. “In 2021, it’s not so much what’s going on with the steel market but you talk about something we haven’t faced in at least a decade, which is a global demand push for a lot of different commodities. If I have to sum it up for the first four months or so of the year, it is not so much your traditional dry bulk demand drivers that we have been talking about, but something that people have not seen in a decade.”

For example, the Baltic Exchange’s supramax 10TC, a weighted average of spot rates across 10 routes, has skyrocketed 134% to $26,493 per day on Friday since the beginning of the year.

The capesize 5TC has meanwhile almost doubled to $31,643 per day but has been much more volatile amid a host of factors that include China’s ban of Australian coal and rising ore prices.

“If you look at the dry bulk space as a whole, it is the smaller-size vessels that are much more levered to the economy rather than the big capesizes that are more levered to Chinese steel production. It’s more of a push from the low end of the dry bulk rather than your capesizes benefitting the smaller sizes.”

It is hard to tell how long this scenario will last as Covid-19 restrictions loosen up and demand for commodities besides steel continue to grow, he said.

“I think it is anybody’s guess as to how long this is going to last because by reopening of the economies, by significant growth in demand for a lot of smaller, less important commodities, I want to say, as well as a lot of logistical issues across the supply chain and dry bulk as well. Having said that, you get into a seasonally stronger period for iron ore and steel that will play on top of rates so far.”