Capesize Rates Drop From Lower Chinese Demand

by Lloyd's List - last modified May 29, 2012 12:34 PM

Positive market sentiment has taken a bashing from weak manufacturing data from China, bunker prices and generally slackening demand.

For the voyage between West Australia and China, rates stood at between $7.50-$7.60 per day, down from$7.80-$8.00 per day the previous week before.

Rates for the benchmark voyage between Tubarao in Brazil and Qingdao in China lost $1 last week to fall below$20 per tonne.

The equivalent time charter rates for round-trip voyage between West Australia and China stood at between $5,000-$6,000 per day, a Hong Kong broker said.

Time charter rates for the voyage between Brazil and China were higher, above $7,000.

Brokers in Hong Kong predict that the market will hold flat this week if bunker prices stay low.

Bunker prices in Singapore on Thursday stood at $639 per tonne, down from over $670 per tonne two weeks ago. Prices have tracked declining oil crude oil prices for more than a month.

The broker said owners had been waiting out the market all week, holding back from accepting relatively low rates, but if conditions persist this week, they will accept these prices.

Early results form manufacturers’ purchasing in China indicate that industrial output is still slowing.

The HSBC Flash Purchasing Managers Index, a preliminary release of the PMI, retreated to 48.7 in May from a final reading of 49.3 for April.
Last week there were also reports Chinese buyers delaying their iron ore and coal orders.

In the case of iron ore, delayed cargoes appearing on the spot market contributed to the downward fall in prices.

If there is continued slack demand from China’s steel mills, the shipping industry faces an increased risk of counterparty default, along with “further headwinds for the already pressured owners”, RS Platou Markets analyst Frode Morkedal said.

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