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Dry bulk market keep rising

54909 fcras 27/3 2012 11:11

Dry bulk market keep rising following the same trend of last week

Tuesday, 27 March 2012 ' 00:00

The dry bulk market kept its upward momentum this week, on the same reasons of those last week. That is, the smaller ship types are still on the rise, while the larger Capesizes still seem to suffer from a lack of demand.

During Monday, the industry's benchmark, the Baltic Dry Index (BDI) was up by 0.44% to 912 points, with the Supramaxes and the Handies leading the surge with respective increases of 1.16% and 1.45%. Panamaxes were unchanged, while Capesizes fell again, this time by 1.10% to 1,354 points.

"In the Handysize/Supramax segment, we saw a recovery across the board last week. The Pacific region in particular saw a significant uptrend due to increased nickel ore volumes being shipped from Indonesia and the Philippines to China.

While on Monday Supras could command not more than $15/16,000 delivery SE Asia for such business, the rates have now exceeded the $20,000 mark. The USG upswing was more significant for the Supras than for the Handies.

While $17,000 was considered a good rate at the beginning of the week,nowadays rates are approaching mid $20,000 again for such business. In Brazil the average waiting time for grain loaders has gone up during last week, illustrating the increased activity as well as the rising freight rates.

Handysize cargoes from Upriver to Morocco are being fixed nowadays in excess of $40 pmt, which marks an increase of about $5-6 pmt compared to the beginning of last week. On the Continent we could observe a slow but steady improvement.

Supras can earn low/ mid $10,000 again for trips to Med with scrap" said Paris-based shipbroker BRS, in its latest weekly report.

In a story by Maria Bertzeletou, on behalf of Hellenic Shipping News, the analyst said that "Supramax and handysize units are on the spotlight as being the star performers from March 2nd by showing continuous weekly increases.

Smaller vessel categories, supramax and panamax, are moving higher due to strong fixture activity in both the Atlantic and Pacific basins with capesizes being still under serious pain from hefty overtonnage and fragile Chinese iron ore import market sentiment. In the panamax segment, South American grain demand remains the key driver force" she said.

By contrast, Capesize vessels seem that will suffer for a longer period of time as Chinese inventories remain hefty, despite their fall to 99,4 million tons, 500,000 tons less than a week ago.

In addition, China's government announcement for an economic growth of less than 8% in 2012 pours more uncertainty in the already volatile iron ore market for the massive buying power of the world's largest iron ore consumer.

BHP Billiton is predicting that the growth of seaborne iron trade will amount to little more than 4.4% over the course of this decade, nearly half the 8.4% growth figure achieved between 2000 and 2010.

One positive sign is that China's daily crude steel output stood at 1,898 million tones for the first ten days of March, surging 13% from the preceding period, according to data from the China Iron & Steel Association.

Steel demand has started to pick up in the world's top consumer during March amid a gradual recovery in construction activity, but buyers remain wary about a slowdown in economic growth, which may continue to weigh on the steel sector.

"Steel demand is warming up as more construction projects resume, but it is still weaker than the corresponding period of last year," said a steel trader in Beijing.

Although the negative sentiment that currently persists in Chinese iron ore market, with worries for a long last recession in the world's largest consumer country, big miners are betting on a soft landing for the world's second biggest economy.

It is believed that China's import demand would continue to grow over the next several years, albeit at a slower pace, which should be enough reason for commodity producers to continue their expansion plans.

"Nobody is saying that demand growth in China for iron ore is going to go away, just that growth rates will not be as high as they were," said Mike Young, managing director of BC Iron, which relies on sales to China for all its revenue.

Furthermore, recent investigations by Raw Materials Group revealed that global iron ore demand is set to double to around 3,5 billion tones per year by 2030, with Chinese appetite for the commodity continuing to drive the market, albeit at a slower pace than during the last decade" said Bertzeletou.

Nikos Roussanoglou, Hellenic Shipping News Worldwide


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