Capesize rates stage 'V-shaped recovery' on China iron ore demand, vessel delays

Singapore — Capesize freight rates are staging a "V-shaped" recovery early August, boosted by China's iron ore buying spree and a disruption in tonnage supply amid bad weather, following a slide in July, market sources said Aug. 5.

"China is buying all the iron ore that they can find, and supply of iron ore is tight," a ship chartering source with a miner said. "Also, the fact that they have turned a net importer of steel shows there is demand for steel within China," the source added.

The Platts Cape T4 index for non-scrubber fitted ships -- which takes into account various global routes -- hit $21,000/day on Aug. 5, a 61% spike from $13,057/day on July 24. Similarly, the Cape T4 index for scrubber-fitted ships jumped 52% to $22,723/day over the same period, S&P Global Platts data showed.

The increasing appetite for iron ore was reflected by a six-day rally in prices. Platts assessed the 62% Fe Iron Ore Index at $118.45/dmt CFR North China on Aug. 5, which was up from $107.80/dmt on July 27.

Shipping market sources expect iron ore miners to maximize their output as much as possible, given the current prices.

Meanwhile, the momentum within the Pacific shipping market remained strong as West Australian miners were actively seeking tonnage to cover their positions for second half of August laycans, a Capesize shipbroker said.

In addition to iron ore demand boosting Capesize freight rates, bad weather has also contributed to the rise.

Typhoon Hagupit, which made landfall Aug. 3 south of Shanghai, would tighten tonnage, another shipbroker source said.

Crew replacement issues amid the corornavirus pandemic was already impacting freight rates due to vessel delays in recent weeks.