Dry cargo rates plunge | Finansavisen

A month ago, cheers were at their peak in the dry cargo market. Capesize rates were up to over USD 35,000 a day and the average rate since the turn of the year was around USD 25,000 a day. A better start to the year in the dry cargo market had not been had in 14 years.

In recent weeks, however, the market has turned downward again and on Tuesday the caprates fell below 20,000 dollars for the first time this year.

“The sharp rate drop is due to several factors, but can mainly be linked to the development in the Atlantic market,” says dry bulk analyst Ingeborg Almås at Clarksons.

The main reason why the capesize rates were far stronger than expected in the first quarter was that the El Nino phenomenon created dry weather in Brazil.

TURNING UP AGAIN SOON: Ingeborg Almås believes in increasing rates and continued solid earnings in the capesize segment. Photo: Clarksons

— El Nino facilitated a large increase in export volumes of iron ore, which has contributed to a solid tonne-mile effect. Volumes largely surprised on the upside, and the world’s capesize fleet was not positioned for this. It resulted in a tightness in the market, and increasing rates, says Almås.

Bottom reached?

In the last couple of weeks in March, however, it rained quite a bit more in Brazil, which affected logistics and reduced iron ore exports.

– In addition, significantly more ships have positioned themselves in the Atlantic Ocean in the last month. At the same time, spot activity for bauxite from Guinea has been rather sluggish in the last couple of weeks, exerting further pressure on rates.

Almås now believes that the bottom is now about to be reached in the capesize market.

— The negative effect of the fleet positioning will be relatively temporary. Seasonally, iron ore volumes and bauxite volumes should also increase in the coming months, in addition to fleet growth being minimal. This should lay the foundation for slightly increasing rates, and continued solid earnings in the capesize segment through 2024, says the Clarksons analyst.

Upturn on the stock exchange

The investors on the stock exchange seem to agree with Almås that the downturn in the dry cargo market appears to be of a temporary nature. The dry bulk shares have been roughly flat in recent weeks, despite earnings having fallen sharply. Since the turn of the year, Belships is still up more than 50 per cent, while Golden Ocean and 2020 Bulkers have risen by 43 and 27 per cent respectively.