The dry cargo spot market has been in descent since the high of early September, with momentum down for capesize[ds_preview] and panamax ships in the Atlantic and the Pacific. However, the downward trajectory flattened out during the last weeks.
Average TC earnings seem to have found some support at levels around 24-25,000$/day for capes and at 15,000$/day for panamaxes (82,500 dwt) which is still strong compared with levels in recent years. Average rates for 58,000 dwt supramaxes and for 28,000 dwt handysize types were hovering at around 13,500$ and 9,300$/d at the time of writing – down around 7% month-on-month. As in the container market, the »scrubber effect« is considered to be a major factor for spot vessel earnings today, albeit exact data on the volume of tonnage tied up by retrofits is missing. The constraints seem to have gone a long way in neutralising the impact of soaring newbuilding deliveries in Q3 which were at their highest level since early 2017. Cargo demand also played a role, though, with combined imports of coal, iron ore and soyabeans in China reportedly reaching a record volume in Q3 – over 400mill. t.
In the panamax segment, grain liftings on the East Coast of South America continued to offer good support. Trade data for Argentina and Brazil showed that their combined exports surged to a record high in Q3, as broker Simpson Spence Young pointed out. Y-t-d volumes are up over 15mill. t at 66mill. t which also benefited the smaller geared bulkers. Over in the Pacific, the coal trades have shown robust growth, with imports in China, India and some other southeast Asian countries set for steep y-o-y increases – a boon for panamaxes, supramaxes and handies.
Market expectations for the rest of the year are split, though, as China might well apply strict import quotas again in the final weeks of the year. The question in that case is whether India can pick up the slack. Its coal imports are poised to reach a new high this year (perhaps as much as 214mill. t against 187mill. t last year). With steam coal inventories running at low levels of just ten days of nationwide consumption and domestic production restrained by an extended monsoon season and mining strikes, there could even be more upside potential.
By contrast, the outlook for the steel and iron ore sector – the largest source of cargo for dry bulk shipping – has grown more uncertain lately. According to the short range outlook by the World Steel Association, y-o-y growth in steel demand will drop to 1.7% in 2020, down from 3.9%. The fall would be entirely due to slackening growth in China where demand is forecast to expand by just 1.0%, against +7.8% this year. On the other hand, the rest of the world will see steel demand growth pick up from 0.2% to 2.5%, according to World Steel. This will be driven by a recovery in Europe, South America and Africa. While a slowdown in China is bad news for capesize carriers that mainly serve China, more steel trading (and perhaps more importation of steel-making ingredients) in the rest of the world might spawn opportunities for smaller bulkers and multipurpose vessels.
