Over the last thirty days, the supply of commercially available Capes vessels dropped by 40% (from approximately 77 vessels to 44).
The number of liftings has decreased over that period, as well, falling 10% in West Australia and Brazil. When we compare the number of liftings to the same period in 2019, we also see a 10% decrease.
China’s Iron Ore reserves have dwindled since the start of the COVID19 outbreak, which could explain the increase in the number of vessels targeting load dates at the end of June. Over the course of the month of June, China’s Iron Ore inventories have continued to drop steadily, to under 108 million tonnes (Mt), the lowest level since October 2016.
The vessel supply drop that followed this increase in demand was not surprising. In the graph below, we see that the number of vessels that could potentially load in Brazil in the next 20 days, the typical fixing window for Capes, has dropped more than 40% during the last 30 days. Freight rates for the Capes market have reacted accordingly.
In addition to the above, in the screenshot below, we can do a deep-dive on the decrease we see looking at “ballasters” only in specific regions, like South Africa, East Africa, India. The decrease we see there is also significant.
When the spot market experiences such an increase, it is not uncommon to see similar freight market dynamics play out in smaller vessel segments. For example, in the graph below, you can see freight rates for multiple vessel classes for the Brazil to China route.
The earnings associated with the market increase shown above are reflected in the table below, comparing earnings between beginning and end of June, for a round-trip voyage from Brazil to China (for a non-scrubber fitted vessel).
The question remains whether this market change is here to stay over the next several months. It seems that this will be highly dependent on China’s desire to build reserves not only for Iron ore but also for other commodities like grains. It seems that soybeans reserves build up has already started and corn may not be far behind. Let’s see how these new trends will impact vessel supply and therefore rates.
