MSI: Dry Bulk Market Could Recover in 4th Quarter

The dry bulk markets are expected to see a fourth quarter bounce in chartering activity for both the Capesize and Panamax sectors,driven by improving iron ore, coal and grain trades, but the effects may be limited, according to Maritime Strategies International (MSI).

MSI said that it sees positive signs beyond the traditional summer lull in chartering activity for these sectors, however, the geared bulker segment will see slim opportunities with fundamentals weakened by strong vessel deliveries.

With the vacation season keeping downwards pressure on earnings in the short term, market sentiment for Capesize spot rates in Q3/4 has dropped over the last month.

The August Capesize time charter average contract was marked at USD 4,525 on August 17 by Freight Investor Services and the fourth quarter contract at USD 8,250.

MSI predicts an average spot earnings level for a modern Capesize in October 2016 of USD 10,400.

“Contrary to recent reports, vessel movements data shows that Roy Hill’s new iron ore operation in Western Australia is ramping up more quickly than expected and should reach just below its maximum capacity by December. Seasonal coal trade should also provide some support for Capesize shipments into China. We continue to forecast Capesize spot rates over USD 10 k/day in October, but rates will most likely drop early in the new year on seasonal trade weakness,” Will Fray, Senior Analyst, MSI said.

In the Panamax market, the FIS forward curve was marked on August 17 at USD 5,550 for the August TC contract and USD 6,625 for the fourth quarter contract. MSI forecasts an average spot rate in October of USD 7,000.

In the Handymax/Supramax segment however, hopes for a resumption in bauxite trade from Malaysia have diminished with another extension of the ban on production until mid-September. MSI’s forecast for Supramax spot rates puts October rates below July levels, falling to below USD 6 k/day in the new year.

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