Capesize freight rates fell sharply with levels for voyages within the Pacific dropping more steeply than for trips out of the Atlantic, from the unseasonal highs registered during early January, dragged by low cargo demand and congestion at Chinese ports.
The time charter equivalent (TCE) rate for a ship opening in North China to do a trip via Western Australia with iron ore and back touched $7,546/d on Jan. 28, the lowest since June 3, 2020, and down 72% from Jan. 12. The TCE for a trip via Brazil back to China was at $13,300/d on Jan. 28, down 36% from Jan. 12, S&P Global Platts data showed.
The TCE for a Pacific trip was $5,754/d lower than the rate for a trip via Brazil, the widest such discount since Platts started these assessments in November 2019. The TCE for a Pacific trip was higher than the TCE for a Brazil round voyage on 60% of the assessed days over 2020.
According to cFlow, S&P Global Platts trade-flow software, weekly iron ore shipping volume from Western Australia has dropped over the past three weeks. The combined export volume of Western Australia's mining majors Rio Tinto, BHP and FMG has dropped by 38% during the week ended Jan. 23 from the week ended Jan. 2.
While demand has been moderate, congestion at Chinese ports has been easing resulting in increased supply, which has pummeled the rates in the Pacific, market sources said.
"For owners with spot ships open in the Pacific, now [they] only have two choices -- one is conceding for covering at lower freight rate levels for Pacific trips, and that's why the Pacific market plunged," a ship-operating source said, adding that the other option was to ballast into the Atlantic region.
Given that the returns on a trip via Brazil were higher than for a Pacific round trip, market sources said that there was a growing list of ballasters.
"There are currently many ships that have their [destination] pointed toward Singapore, which may potentially point toward a higher ballaster count," a Singapore-based shipbroker said. If these ships do eventually ballast to the West, it should give a better balance of tonnage between the Pacific and the Atlantic, the source added.
The market will grind lower as some ballasters start to compete for cargoes coming out of the North-Atlantic and for fronthaul voyages, a second ship operator said.
