Freight rates for dry bulk carriers have continued to edge higher during the last week of July, with the industry’s main benchmark, the Baltic Dry Index (BDI) gaining some 2.16 per cent over the previous week. This was the 10th straight session of increases, despite the fact that most analysts appear rather pessimistic on the short-term prospects of the market. This rebound has reportedly been triggered by a firmer iron ore demand and a restocking taking place in China, as a result of a better looking steel market. Shipbrokers estimate that currently low spot prices for iron ore, not to mention freight rates are causing more cargo purchases from steel mills.

Strong demand out of South America also pushed the Panamax and Handymax markets up this week, bringing an overall improvement to the BDI. However, compared to pre-crisis levels the recovery is still patchy and heavily dependent on Asia. In the first six months of 2010 global steel output was seven per cent higher than in the same period in 2007, driven by a 23% and 35% increase in production in Asia and China respectively, reports brokers Barry Rogliano from Paris. However output in the EU, US and Canada remains on average 15% below 2007 levels.

But, apart from cargo demand trade patterns and seasonality, the main concern of the market is the oversupply issues it faces, in terms of new tonnage delivered. According to ICAP Shipping, the dry bulk fleet expanded by some 340 ships amounting to 32Mdwt in the first half of this year after allowing for the limited number of scrappings and other removals (some 46 ships of 1.6Mdwt). At the same time a large number of ships were contracted for future construction (346/31.2Mdwt). This rapid expansion in the fleet - some 54Mdwt (+13%) over the past 12 months has been a primary factor in the decline in earnings since May this year - notes Hellenic Shipping News.

Panamax
Despite a fairly low level of activity, the Panamax market managed to keep rates stable and even finish the week on a positive tone. Both the Atlantic and Pacific benefited from increased grain activity out of South America. Meanwhile the big trading houses took the bold step of taking ships on short period from Asia at rates around US$22-23,000 per day, while straight east coast South America rounds were in the lower US$20,000s. This long ballast business was an interesting option for Asian operators and helped sustain prices in the Pacific basin.

Supramax/Handy
After several weeks of a falling market, it seems that the Supramax segment reached a floor, and we ended the week with the average of the TC routes at US$18,250, about a 5% increase in comparison to the average the previous week. This upward sentiment seems to be driven by the rising FFA market. Owners were putting their rates up even though the number of cargoes in the Atlantic was not growing. Supramaxes were getting fixed in the high teens from West Africa via ECSA with redelivery Skaw/Passero, and for longer runs from the Continent Supras were getting mid US$20,000s with redelivery Far East routing via Suez. The Pacific picked up significantly with Nopac rounds raking in the high teens at the close of the week, up from mid-teens at the start. Pacific rounds were also being fixed in the high teens for redelivery India or China. A fair number of backhauls were getting low teens basis north Asia.

India also saw improvements in rates, despite it still being monsoon season. Vessels out of ECI fixed in the high teens while vessels in WCI got similar numbers for ECSA rounds. Short period saw a bit of action with charterers paying around mid/ high teens to low US$20,000s for short period, depending on specs and position. There was not a significant difference in rates between short period and slightly longer period (ie, 1year to 18 months) concluded Barry Rogliano.