Capesize bulker earnings soared to the highest level in almost five months on buoyant fixing activity, with healthy iron ore demand in China pulling in cargoes from Western Australia and Brazil.

The segment outperformed its smaller counterparts last week, with the strength in the market reflected in the Baltic Capesize Index, which jumped to 2,630 points on May 11 from the previous week level of 2,337 points.

The weighted time charter average also improved significantly, up by 13% on week to close at $20,684 per day.

Braemar ACM said in its weekly report that the rise in bunker prices from China and Singapore promotes a greater reluctance from owners to ballast longer distances. What is more, the spread between C5 route and C3 route is narrowing, with ship owners potentially getting a premium for shorter duration compared with the longer duration.

“If this trend maintains, we can anticipate a further push on freight rates in the near term,” it added.

On the benchmark route between Western Australia and China, C5, rates were up 10.1% at $8.4 per tonne.

For the C3 route from Tubarao in Brazil to Qingdao in China, the rate climbed to $19 per tonne from $18.42 last Friday.

Meanwhile, Chinese steel production has been stronger than expected this year, with production in March reaching 74m tonnes, Maritime Strategies International estimated.

In 2017, monthly Chinese steel production surpassed this level on only two occasions, in July and August, indicating that 2018 is set to be another year of Chinese production growth, the shipping consultants said in its dry bulk freight forecaster.

What is more interesting is that domestic iron ore production in China continues to decline. In the first quarter of this year, iron ore production was down 36% year on year.

China’s domestic iron ore is generally very low grade and requires significant beneficiation and therefore is heavily polluting. The focus towards higher efficiency in addition to reducing pollution are the main reasons for Chinese mills and traders to have a strong preference for imports.

MSI expects iron ore imports in China to pick up in the near term as weather disruptions in Brazil come to an end.

With the ever-increasing demand for cargoes, together with a tight availability of ships and limited deliveries at least until next year, a Hong Kong-based broker said this week’s breaching of the $20,000 per day barrier was only the start of record earnings for capesize operators.

“While the market would show its traditional summer volatility, with fluctuations on a weekly basis, overall the only way was up — at least for the next few months,” he said.