Capesize freight rates hit a three-month high in January defying historical weak seasonality trends as supply bottlenecks caused by adverse weather at the Chinese coast and high commodity prices continued to drive demand for tonnage.
S&P Global Cape T4 index for non-scrubber ships touched a 90-day high at $23,908/day on Jan. 12, in contrast to the past, where Q1 mostly remained a seasonally low period for the Capesize market.
Also, Cape T4 index year-to-date this year has seen a multi-year high for January despite poor weather affecting iron ore shipments out of Brazil and Australia.
On the key west Australia to Qingdao route, Platts TCE rate for January has so far averaged at $22,237/day, almost double of what was registered in the same period from 2017 to 2019. In 2020, the average TCE fell on the back of high low sulfur fuel oil price amid IMO 2020 regulation at low-$3,000/day level.
“The weather will be the key for the tonnage supply, which would determine the trajectory of freight rates,” a ship-owner source said.
The inclement weather caused by icy conditions are affecting cargo operations, especially around north China which in turn tightened tonnage supply over the past two weeks.
This situation, to an extent, has created a sizable price imbalance in trade out of the Pacific versus the Atlantic market.
Capesize ships opening in the Pacific for new employment was fetching TCE returns over $6,000/d for the first trading week in 2021, which forced owners to embrace shorter trips within the Pacific region compared with a longer trip via Brazil. This resulted in fewer ships ballasting to the Atlantic, coercing charterers with cargoes in that region to bid up to secure tonnage.
