The Chinese iron ore market is a particularly strong contributor to capesize demand. So, let’s begin with this simple chart from Clarksons showing a stark reversal from the flattening and shrinking of seaborne iron ore.
Furthermore, they project that this isn’t just a one off but a compliment to a global trend which is set to last through 2021.
Notice the above chart refers to volume. However, it’s possible that cargo miles may benefit even more due to a rise in expected Brazilian output coupled with increased efficiencies of a renewed Valemax fleet.
A total of 20 vessels measuring 325k dwt or larger were launched in 2020. Not only is this a high number but many are expected to see regular work on the Brazil to China long haul.
Here are two random examples, which mimic most of the trading patterns from these newly launched vessels.
The first from the Sao Grace.
The next from the SM Gemini 1.
Notice they are exclusive to the Brazil/East Asia routes, as are nearly all the other recent builds in that size range. Let’s also recall that there are still 26 vessels in that size range still waiting to be delivered by the end of 2021.
The return of Brazilian volumes has been a much-anticipated event. The tragic Vale dam collapse took a toll on 2019 production and the pandemic led to another “Black Swan” event in 2020 which impacted export volumes.
Brazilian seaborne iron ore exports in 2019 took a giant leap back to 2014’s levels, and 2020 is expected to mimic that.
However, with improved economies of scale regarding transport costs, Brazils main hurdle when competing with Australia, we should see greater volumes and cargo miles traveled.
Clarksons is projecting just such a change for 2021.
Real time data out of VesselsValue regarding cargo miles for capesize vessels and larger on this specific route suggest that we may have just witnessed a record.
Can we avoid a third “Black Swan” event in a row for 2021? If so we could see volumes on the Brazil to China route improve over the course of the year.