From the onset of 2021, Capesize dry bulker spot freight rates have soared. Why do have this counter-seasonal upswing? Is it all due to 66 bulkers being ‘stranded’?
“The Capesize market has always been volatile, but in the past two years, this has been amplified.”
Explore the 3rd “Shipping Number Of the Week” in 2021 from BIMCO:
BIMCO’s Shipping Number of the Week
1,427 Capesize journeys in the first twenty days of the year
The year 2021 has started strongly for the Capesize market with a 10.4% increase in the number of journeys completed or underway in the first 20 days of the year compared to the same period last year (source: VesselsValue). This counter-seasonal upswing stands in contrast to the development for all other dry bulk ships which have seen a 2.8% decline in activity in the same period.
BIMCO expects that the number of Capesize journeys completed or still underway when January comes to an end, will exceed the number recorded in December 2020 (1,768).
Cold weather in the Far East and record high electricity production in China has, among other things, caused higher demand for Capesize imports. Coal in particular is in high demand with rising prices for domestic coal in combination with tightening availability. Transport demand from iron ore has also been counter-seasonally strong, with Australian miners selling whatever they can to benefit from high commodity prices.
The strong start to the year for Capesize ships has also been reflected in earnings, which, after high volatility in 2019 and 2020, have averaged USD 22,015 per day since the start of the year, comfortably above the USD 15,300 per day needed for an average Capesize ship to break even. Rates peaked at USD 26,489 per day on 13 January and now stand at USD 24,148 per day (19 January).
“The Capesize market has always been volatile, but in the past two years, this has been amplified. In 2020, the difference between the highest and lowest daily Capesize earnings was almost USD 33,000. While 2020 was in many ways an unprecedented year, the range was in fact even higher in 2019 and this volatility is unlikely to disappear any time soon,” says Peter Sand, BIMCO’s Chief Shipping analyst.
“However, 2021 may prove more profitable as the world starts recovering with a potential boost from heavy infrastructure stimulus, which is expected to outweigh headline worthydisruptions, particularly in relation to Chinese coal imports,” Sand says.