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Asia Dry Bulk-Capesize rates hit 3-year high, to remain firm on ship shortage

Freight rates for large dry cargo ships on key Asian routes, which hit three-year highs this week, could stay around the current levels or nudge slightly higher if shortage of vessels for prompt hire continued, brokers said.

“It’s a good lead up to Christmas for the capesize market,” a Singapore-based capesize broker said on Thursday.

“The market is taking a breather. I can see rates holding near where they are if not moving up a bit,” the broker said.

Owners are resisting charterers’ attempts to push rates lower from Australia to China, while owners of ships from Brazil are holding out for rates of more than $22 per tonne.

“Charter rates from Australia have hit a floor. Rio Tinto is pushing for $9.50 a tonne, but owners are resisting,” the Singapore broker said.

“The number of ships on the water in the Pacific is quite tight. From Brazil it is still very tight for ships with loading dates in December and early January,” the broker said.

That came as iron ore stocks at Chinese ports climbed to 140 million tonnes in November, from 132 million tonnes in mid-October, ship broker Banchero Costa said in a China commodities report.

China’s iron ore imports rose 6.3 percent between January and October, while coking coal imports climbed 20.2 percent and steam coal 9.6 percent, the report said.

Iron ore and coal are staple cargoes for capesize ships, which can carry around 170,000 tonnes of the steel-making ingredients.

Supply issues in China’s steel sector has pushed demand for imported iron ore even higher, Australian bank ANZ said in a note on Thursday.

“With domestic production struggling to grow steel mills will be forced to rely more on imported iron ore,” ANZ added.

Iron ore prices are expected to stay around $70 per tonne, ANZ said.

“The freight market for capesize vessels continues up in line with firming iron ore prices,” Norwegian ship broker Fearnley said in a note on Wednesday.

Capesize charter rates on the Western Australia-China route rose to $9.75 a tonne on Wednesday from $9.44 a tonne in the previous week. Rates climbed to $9.95 a tonne on Dec. 4, the highest since April 2, 2014.

Freight rates from Brazil to China climbed to $20.94 per tonne on Wednesday from $19.79 a tonne the same day a week ago. They hit $21.27 a tonne on Dec. 4, the highest since Nov. 12, 2014.

Panamax rates for a north Pacific round trip voyage soared to $10,859 per day on Wednesday, up from $9,750 per day last Wednesday, the highest since Nov. 8, on more cargo and tighter tonnage supply.

Rates in Asia for smaller supramax ships were largely unchanged from the previous week, varying between $8,000-$11,000 per day depending on the trade.
Source: Reuters (Reporting by Keith Wallis; Editing by Sherry Jacob-Phillips)

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