Despite the fact that Cape rates fell last week, there is so far no sign of a global and harsh collapse of the market as Panamax and Handymax rates did not take the same direction. The "war of information" which now seems to have been declared between iron ore producing countries and importers is taking its share in this muddle, with huge discrepancies between each side’s evaluation of what could be the level of trade next year. However the question is more how much trade will grow next year rather than if it will grow or not, but opinions highly diverge, for instance: this week the Chinese Ministry has forecast that "China will import only about 35Mt more iron ore in 2006" which is a drop compared to this year growth, while the Australian Bureau of Resources wrote "Iron ore exports are forecast to increase by 72 per cent to A$14bn in 2005-06… this increase reflects stronger iron ore import growth from China", which is a strong revision of some more pessimistic earlier predictions.
As anticipated, the underlying Panamax market fundamentals remained unchanged last week and we saw the Atlantic weaken slightly whilst rates in the Pacific continued to rise. The BPI opened at the beginning of the week at 2362 and closed up at 2424. Little fresh enquiry and building tonnage increased pressure on both the Atlantic round voyage and the fronthaul, whilst healthy fixing levels for tonnage on early positions pushed the Pacific round voyage rates up from US$18,412 at the start of the week to US$20,176 at the close. There were some healthy short period fixtures which also helped underpin the Pacific market, with reports of LME vessels open on early positions being fixed at around US$19,000 for 3/5 months. As a result, owners were reluctant to move from the Pacific to the Atlantic which pushed the backhaul rate higher rising from US$14,486 to US$16,153. A late flurry of activity in the Atlantic may give some support to rates but there is little evidence of fresh cargo at this time - the Pacific remains positive for the time being but again without fresh enquiry could lose steam by the end of the week.
The Far East levelled off after several weeks of weakness in the Handymax market, pushed up by the Indian iron ore exports and the continuous stream of Chinese coal imports. Ultramax achieved high teens/US$20,000 for Nopac or Aussie round voyages. By contrast the Atlantic, that was an owners’ playground for a fair number of weeks, is now showing signs of a serious slow down. Save for certain areas, namely the South Atlantic, where prompt orders are still difficult to cover, the Continent, Med and US waters may soon become owners’ headache. Ballasters are now being seen and may put further pressure on the US Gulf/ECSA range.
Source: Barry Rogliano Salles, Shipbrokers, Paris
