Global Spot Chartering Activity Remains Relatively Firm
Through the first three days of this week, the Baltic Dry Index has increased by 59 points to 890 points. This represents an increase of 7.1% from the end of last week. In total, 48 cargoes have been chartered in the spot market so far this week. In comparison, 53 cargoes were chartered during the first three days of last week. Dry bulk freight rates have increased in all segments of the market except for the handysize segment. However, handysize rates have remained well above basic operating costs.
Capesize Rates Finding Support
As of Wednesday, average daily capesize rates have increased to $14,430/day. This marks an impressive increase of $1,689 (13.3%) from the end of last week. Capesize rates are a good deal higher than they were at the end of last week as capesize fleet growth has remained low while Chinese demand for iron ore imports has remained robust. Overall, Chinese steel production has remained at a record level and Chinese steel mills continues to consume a record amount of iron ore. At the time time, Chinese iron ore mines have suspended domestic iron ore production as Chinese mines have high costs and cannot compete with Australian and Brazilian mines that have much lower costs. Going forward, capesize rates are set to increase even further and are likely to reach very high levels this year. Chinese iron ore imports are poised to remain robust while capesize fleet growth is set to stay low. This creates an environment that causes capesize rates to surge and reach very high levels.
Global Iron Ore Exports to Increase Further
Australia's Bureau of Resources and Energy Economics (BREE) released its latest quarterly trade forecast last week which predicts Australian and Brazilian iron ore exports will now rise this year by a total of 132 million tons (15%) from 2013's total. This is a very large amount and will help the capesize market find even greater support this year. According to BREE, Australian iron ore exports will total 680 million tons this year, which would be an increase of 101 million tons (17%) from the 579 million tons exported last year. BREE also predicts that Brazilian iron ore exports this year will total 361 million tons, which would be an increase of 31 million tons (9%) from the 330 million tons exported last year. Overall, a 132 million ton year-on-year increase in Australian and Brazilian iron ore exports is an extremely encouraging prediction for the capesize market.