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Dry bulk shipping: Traversing the pandemic times

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Listen: Dry bulk shipping: Traversing the pandemic times

S&P Global Platts dry bulk market experts Shriram Sivaramakrishnan, Carina Li, and Isaac Eio examine how the Capesize, Panamax and Supramax markets have fared in this pandemic-stricken trading environment, and what's in store for shipowners and freight rates in the coming months.

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Transcript

SHRIRAM SIVARAMAKRISHNAN: With roughly 2/3rd of 2020 behind us, it is now clear that change in fuel oil specifications has not had a huge impact. The coronavirus infection spread across the globe has had a more far reaching impact on the global shipping markets.

In this episode of S&P Global Platts Commodities Focus Podcast, we explore how the dry bulk markets have fared so far this year and what is in store for the coming months. I'm Shriram Sivaramakrishnan, managing editor for APAC dry bulk markets, and with me today are Carina Li, Editor covering the Global Capesize markets, and Issac Eio, Associate editor covering the Asia-Pacific Panamax and Supramax markets.

Hi Carina. The Capesize shipowners this year has been over a very wide range. How do you think the Cape market has fared so far?

CARINA LI: Thank you Shriram. Well, the first five months of 2020 was very challenging for this market. We can see that time charter returns to ship owners were crashing down to even below their operating cost due to a combination of factors, such as the seasonal slow Q1 with spring festival period in China, a prolonged bad weather in Brazil and Australia, and many new VLOCs, which is short for Very Large Ore Carriers, had been delivered from end of last year.

Meanwhile, as we all know, there's the coronavirus outbreak, which is still clouding shipping market fundamentals. It has taken a toll not just on global shipping demand but also on tonnage supply. It has impacted delivery of newbuildings, it delayed demolitions, and has also affected schedules for spot ships.

Finally, in June we saw the market swiftly move from $3,000/day and top at over $35,000/day.

SHRIRAM SIVARAMAKRISHNAN: That's a phenomenal recovery for the market to move from $3,000 to $35,000. What do you think was behind this push up in freight rates?

CARINA LI: Yes indeed, Shriram. Actually this movement is mainly driven by the strong iron ore demand from China. Australian shippers were pumping out as much volume as possible at high prices, which was ahead of their financial year end and before scheduled maintenance at WA ports in July. At the same time, the weather conditions in Brazil were also improving and Vale ramped up its production.

Then we come to the tonnage supply. We can also find that vessel supply has tightened around this time due to crew replacement issues, and the port congestions in China and 14-day quarantine requirement at many ports in Australia.

So, while the rates are well above the lows seen during first-half of 2020, we continue to see that the rates are very volatile. The market is expected to remain very positional as tonnage supply gets affected by inefficiencies, which is beyond the control of the shipping market.

SHRIRAM SIVARAMAKRISHNAN: Interesting. So the volatility is what is going to keep us all interested I guess for the rest of this year. Moving on to Isaac. What is it like in the Panamax and Supramax markets so far this year?

ISAAC IEO: Thanks, Shriram, for having me on board. Well on the Panamax and Supramax markets, I think, both markets crashed to unprecedentedly low levels, but also the observed recovery has been phenomenal. The adaptiveness of the major economies have kept the dry bulk freight rates afloat, in no small part due to the blazing recovery speed of the Chinese economy. Now the Panamax vessel demand had been highly depressed due to inadequate coal demand in the Pacific. But, the saving grace for the Panamaxes though, were the grain cargoes from east coast South America, which really provided immense support during the soybean harvest period in Brazil. China mostly sources the bulk of their soybeans from Brazil anyway, but this year Brazil accounted for more than 75% of China's total soybean imports. And also the Brazilian real has also played a major role to boost grain exports and dry bulk demand. The Brazilian Real has seen depreciation of over 30% of its value against the US dollar since the beginning of the year.

And just to put into perspective of how much the Panamaxes have risen through the year, we've introduced the KMAX 9 index back in May to track the weighted average Panamax performance in the Asia-Pacific. And KMAX 9 index has actually risen through the months, from an average of $6,000/d in May to an average of $14,000/d in August.

So the Supramaxes, too, have handled the new normal quite gracefully, and this is through the strengthening of the iron ore trade on the Supramaxes, which has seen the east coast India to China iron ore trade solidifying, yet again, into a front haul trade. And of course just now I was mentioning the grains on the Panamaxes, some of the grain demand too had slipped through to the Supramaxes and Ultramaxes too, which certainly helped support the Supramax market as well.

SHRIRAM SIVARAMAKRISHNAN: So a fairly positive recent few months. That said, is there anything else that's drawing the market down or keeping it from going higher further than where it has reached?

ISAAC IEO: Well, the one negative factor I can think of affecting the Panamax and Supramax markets has been the fleet growth. Since 2018, only 13 Panamaxes have been, and there is a net fleet growth of more than 4% in terms of dead weight tonnage for 2020. Similarly, scrapping in the Supramax segment has been low. The net fleet growth for Supramaxes expected for 2020 is about 3%. Also based on the current order book, we are expecting even more vessels coming in in 2021. So that should really keep the freights quite depressed.

SHRIRAM SIVARAMAKRISHNAN: Sure. So vessels coming in and increasing. Supply has been the issue for markets for almost a decade now and we continue to stick with it. Moving on to Carina, you had briefly touched on iron ore flows. How is it driving the Capesize segment?

CARINA LI: Yeah, well, it's no secret that iron ore is the most important cargo for the Capesize segment. In late August price of iron ore delivered in China, hit a 6 year high, valued close to $130/dmt. Robust iron ore prices have spurred miners to maximize their outputs, which has translated into better shipping demand. Much against expectations, Chinese iron ore imports have increased year on year. It was up almost 9% year on year in the first half of 2020 amid the sharp recovery from China. Exports from Western Australia have also increased 6% year on year. At the same time, while Vale has re-affirmed their full year production guidance for 2020, though it would like to be at the lower end of its guidance, which is 310 million to 330 million mt.

SHRIRAM SIVARAMAKRISHNAN: Intesresting. So we're definitely seeing more iron ore flowing into China. Given that and the very high iron ore prices, are we actually seeing new origins of iron ore? Perhaps new trading routes going into China?

CARINA LI: For new trading routes, actually we can say that China is now just buying all the iron ore it can find. But based on data from Platts trade flow software cFlow, we can see that Australia and Brazil are still the main origins for Chinese iron ore imports and contribute to over 80% by volume. But definitely, other miners in Canada, South Africa and India are also getting a piece of the cake. I would like to mention Canada here. Platts has taken note of increasing liquidity of Canadian iron ore movements into China. We have proposed to launch a new Capesize dry bulk freight assessments to move iron ore from Seven Islands on Canada's east coast to Qingdao from Nov. 1, 2020. Also, there is some market chatter on Chinese investments in West African mines, which should start exports in a couple of years or so. But we'll see.

SHRIRAM SIVARAMAKRISHNAN: Intesresting. So a bit more of longer duration origins - Canada and West Africa, which definitely should be welcomed by the Capesize shipowners. Isaac, has this had any impact on the Panamax or Supramax market too - the very firm iron ore prices and big imports by China.

ISAAC IEO: Well, yes definitely they have. Not so much on the Panamaxes, but more so on Supramaxes. China's steel imports have also improved, and they've become a net importer of steel for June and July this year.

SHRIRAM SIVARAMAKRISHNAN: Intesresting. So the world's largest steel producer is also now a net importer of steel. It really does show the demand for steel within China. But given strong performance of the steel markets, especially in China, how have the coking coal flows been this year?

ISAAC IEO: Well, the coking coal prices have been sliding lower through most of this year largely due to lower demand from China. The flows of coking coal have had its fair share of setbacks post-lockdown: some being the trade disputes between Australia and China, the crew change quarantine periods, as well as torrential rains in China creating logistical issues. Lately, however, the flow has improved a fair bit particularly to India, who are fixing greater volumes through their government auctions. We have observed roughly 2 to 3 Panamax-sized vessels fixed daily through the month of July till the present. That has really been quite supportive of the Panamaxes. There has also been some reluctance from shipowners to call Australian ports in the recent month after the Australian Maritime Safety Authority passed a notice in April restricting the maximum number of months a seafarer can serve aboard a vessel to 11. The notice has had the effect of increasing the rate of crew changes and causing delays and bottlenecking in ports especially in Manila where many ship operators look to for changing crew.

SHRIRAM SIVARAMAKRISHNAN: Yeah there is a lot of market chatter about how much longer it is taking to change crew in the Philippines lately. In June we were hearing it was taking 12 hours to change crew and by August that had become almost four days. Moving on to another major demand driver, which is thermal coal. Isaac what is your take on how those prices have been and how that's affected trade flows this year.

ISAAC IEO: Well to put it quite bluntly, the demand for thermal coal has been dismal through the year. Even in the current state, producers in Indonesia are struggling to keep the prices afloat through waves of production cuts. The prices are still pretty low, falling below the $20/mt mark for the lower CV coal, FOB Indonesia basis. Prices have dipped so much in Indonesia that trading of seaborne coal has been stifled. Instead, power producers in India much prefer the cheaper option of lifting thermal coal from the existing stockpiles in India which have seen a tremendous build up during the peak of the COVID-19 lockdown period. At its peak, the stockpile was close to 30 days' worth of coal burn according to data from the Central Electricity Authority in India. We're now seeing a delayed recovery of dry bulk vessel demand to move thermal coal. India's coal-fired power generation is presently back to being at parity with last year's generation. However, the seaborne demand has not recovered fully to the same volume as we expected. Moreover, Newcastle coal prices have stayed lower as compared to prices seen out of South Africa. That has encouraged traders to look at coal from Australia into the Indian subcontinent. So of those flows have even been performed on Supramax ships which has certainly helped that segment.Overall, Platts Analytics is expecting total seaborne thermal coal demand to contract by about 75 million mt year-on-year so the outlook for coal is quite big compared to the other commodities.

SHRIRAM SIVARAMAKRISHNAN: Interesting. And especially interesting to hear that there are Supramaxes that are being fixed to move coal from east coast Australia all the way in to India. The Supramax shipowners will really welcome that. So to sum up all the demand factors that we've seen so far, it loosk fairly positive for iron ore and grain but it looks a bit softer or slower on the coal front. But looking at some of the operational issues which are affecting the market, and this is the year 2020 after all, Carina what is your take on how scrubber fitted ships are facing the market this year?

CARINA LI: Well, Shriram, here I have to mention our Platts scrubber premium index for Capesize, Panamaxes, Ultramaxes and Supramaxes, which can well reflect the additional returns to shipowners with scrubber-fitted ships based on the spread between LSFO and HSFO fuel prices. So this year, we've seen the Capesize scrubber premium index dropping from $12,000/d in early 2020 and has stabilized a shade below 3k/d since mid-March. The scrubber premium has shrunk due to a narrowing spread between LSFO and HSFO prices. And we can see now the scrubber premium negotiated between owners and charterers has switched to a lump sum amount. Also, the 'Bunker Saving Profit Share Clause,' which was something that was up for contention at the start of 2020 has mostly vanished. The lower returns for scrubber fitter ships will also prolong the payback time on the investment and has caused some players to even delay installments on their ships. Some owners have even stalled their scrubber installations despite having to pay a cancellation fee to the contracted shipyards.

SHRIRAM SIVARAMAKRISHNAN: So now for the most difficult question for you, Carina, how do think the Capesize market is going to move for the rest of the year?

CARINA LI: Okay, well, looking ahead, most market players are cautiously optimistic. Demand from iron ore is expected to remain fairly robust. Additional tons of bauxite from West Africa is also adding to the ton-mile demand. The Capesize market could do even better with some additional coal demand which so far this year has moved more to the smaller sizes, as Isaac just mentioned. COVID-19 and issues arising out of it is expected to keep supply side inefficiencies for the rest of this year, so the rates would be somehow volatile.

SHRIRAM SIVARAMAKRISHNAN: Thanks for that. The volatility should keep us glued to our screens for the rest of the year. Isaac, how do you think the Panamaxes and Supramaxes are looking for the rest of the year?

ISAAC IEO: Well, on the Panamaxes, I think grain cargoes would continue to be the driver of the market. Grain purchases by China have been fairly robust this year and expectation is for the same to continue over the rest of this year. In July and August, there has been significant purchases of corn from US as well, and while the sales reported do not indicate the loading dates, the wider expectation of the market is for these shipments to happen during Q4 this year which should continue to support the Panamax market. Now in the Supramax market in the Asia Pacific, it would continue to find support from iron ore cargoes out of India. The higher iron ore prices as well as tightening of credit facilities during COVID-19 period has generally observed a downward shift in cargo sizes. This has led to an increased popularity of smaller sized vessel demand, particularly on the Supramaxes. Until the thermal coal imports into India surge, which at the moment is not the outlook, supply would stay tight on the Indian coast, which will keep the freight rates elevated. There's been a lack of ships on the Indian coast and that has also helped to pull ships from Southeast Asia for coal out of South Africa and iron ore out of India. This increased ballasting has overall helped the tonne-mile demand. Additional demand is coming from grain cargoes out of the Black Sea region and that is pulling ships opening in the Persian Gulf and west coast India.

SHRIRAM SIVARAMAKRISHNAN: Fantastic! Thanks, Isaac. So overall it does look like there's still some positivity to look forward to from an owners' perspective for the rest of this year with regards to the dry bulk market. Thanks for your insights, Carina and Isaac.

A more in-depth analysis of the dry bulk markets and its demand drivers is coming up on October 15, when we reconvene for the Platts Dry Bulk Forum which this year is going to be online. Details on how to sign up for this virtual forum, more news and analysis on the dry bulk markets, as well as information on our price assessments and methodology, are available on spglobal.com/platts. Thank you for your time today.

SHRIRAM SIVARAMAKRISHNAN: With roughly 2/3rd of 2020 behind us, it is now clear that change in fuel oil specifications has not had a huge impact. The coronavirus infection spread across the globe has had a more far reaching impact on the global shipping markets.
In this episode of S&P Global Platts Commodities Focus Podcast, we explore how the dry bulk markets have fared so far this year and what is in store for the coming months. I'm Shriram Sivaramakrishnan, managing editor for APAC dry bulk markets, and with me today are Carina Li, Editor covering the Global Capesize markets, and Issac Eio, Associate editor covering the Asia-Pacific Panamax and Supramax markets.
Hi Carina. The Capesize shipowners this year has been over a very wide range. How do you think the Cape market has fared so far?
CARINA LI: Thank you Shriram. Well, the first five months of 2020 was very challenging for this market. We can see that time charter returns to ship owners were crashing down to even below their operating cost due to a combination of factors, such as the seasonal slow Q1 with spring festival period in China, a prolonged bad weather in Brazil and Australia, and many new VLOCs, which is short for Very Large Ore Carriers, had been delivered from end of last year.
Meanwhile, as we all know, there's the coronavirus outbreak, which is still clouding shipping market fundamentals. It has taken a toll not just on global shipping demand but also on tonnage supply. It has impacted delivery of newbuildings, it delayed demolitions, and has also affected schedules for spot ships.
Finally, in June we saw the market swiftly move from $3,000/day and top at over $35,000/day.
SHRIRAM SIVARAMAKRISHNAN: That's a phenomenal recovery for the market to move from $3,000 to $35,000. What do you think was behind this push up in freight rates?
CARINA LI: Yes indeed, Shriram. Actually this movement is mainly driven by the strong iron ore demand from China. Australian shippers were pumping out as much volume as possible at high prices, which was ahead of their financial year end and before scheduled maintenance at WA ports in July. At the same time, the weather conditions in Brazil were also improving and Vale ramped up its production.
Then we come to the tonnage supply. We can also find that vessel supply has tightened around this time due to crew replacement issues, and the port congestions in China and 14-day quarantine requirement at many ports in Australia.
So, while the rates are well above the lows seen during first-half of 2020, we continue to see that the rates are very volatile. The market is expected to remain very positional as tonnage supply gets affected by inefficiencies, which is beyond the control of the shipping market.
SHRIRAM SIVARAMAKRISHNAN: Interesting. So the volatility is what is going to keep us all interested I guess for the rest of this year. Moving on to Isaac. What is it like in the Panamax and Supramax markets so far this year?
ISAAC IEO: Thanks, Shriram, for having me on board.
Well on the Panamax and Supramax markets, I think, both markets crashed to unprecedentedly low levels, but also the observed recovery has been phenomenal. The adaptiveness of the major economies have kept the dry bulk freight rates afloat, in no small part due to the blazing recovery speed of the Chinese economy.
Now the Panamax vessel demand had been highly depressed due to inadequate coal demand in the Pacific. But, the saving grace for the Panamaxes though, were the grain cargoes from east coast South America, which really provided immense support during the soybean harvest period in Brazil.
China mostly sources the bulk of their soybeans from Brazil anyway, but this year Brazil accounted for more than 75% of China's total soybean imports.
And also the Brazilian real has also played a major role to boost grain exports and dry bulk demand. The Brazilian Real has seen depreciation of over 30% of its value against the US dollar since the beginning of the year.
And just to put into perspective of how much the Panamaxes have risen through the year, we've introduced the KMAX 9 index back in May to track the weighted average Panamax performance in the Asia-Pacific. And KMAX 9 index has actually risen through the months, from an average of $6,000/d in May to an average of $14,000/d in August.
So the Supramaxes, too, have handled the new normal quite gracefully, and this is through the strengthening of the iron ore trade on the Supramaxes, which has seen the east coast India to China iron ore trade solidifying, yet again, into a front haul trade.
And of course just now I was mentioning the grains on the Panamaxes, some of the grain demand too had slipped through to the Supramaxes and Ultramaxes too, which certainly helped support the Supramax market as well.
SHRIRAM SIVARAMAKRISHNAN: So a fairly positive recent few months. That said, is there anything else that's drawing the market down or keeping it from going higher further than where it has reached?
ISAAC IEO: Well, the one negative factor I can think of affecting the Panamax and Supramax markets has been the fleet growth. Since 2018, only 13 Panamaxes have been, and there is a net fleet growth of more than 4% in terms of dead weight tonnage for 2020. Similarly, scrapping in the Supramax segment has been low. The net fleet growth for Supramaxes expected for 2020 is about 3%. Also based on the current order book, we are expecting even more vessels coming in in 2021. So that should really keep the freights quite depressed.
SHRIRAM SIVARAMAKRISHNAN: Sure. So vessels coming in and increasing. Supply has been the issue for markets for almost a decade now and we continue to stick with it. Moving on to Carina, you had briefly touched on iron ore flows. How is it driving the Capesize segment?
CARINA LI: Yeah, well, it's no secret that iron ore is the most important cargo for the Capesize segment. In late August price of iron ore delivered in China, hit a 6 year high, valued close to $130/dmt.
Robust iron ore prices have spurred miners to maximize their outputs, which has translated into better shipping demand. Much against expectations, Chinese iron ore imports have increased year on year. It was up almost 9% year on year in the first half of 2020 amid the sharp recovery from China.
Exports from Western Australia have also increased 6% year on year. At the same time, while Vale has re-affirmed their full year production guidance for 2020, though it would like to be at the lower end of its guidance, which is 310 million to 330 million mt.
SHRIRAM SIVARAMAKRISHNAN: Intesresting. So we're definitely seeing more iron ore flowing into China. Given that and the very high iron ore prices, are we actually seeing new origins of iron ore? Perhaps new trading routes going into China?
CARINA LI: For new trading routes, actually we can say that China is now just buying all the iron ore it can find. But based on data from Platts trade flow software cFlow, we can see that Australia and Brazil are still the main origins for Chinese iron ore imports and contribute to over 80% by volume. But definitely, other miners in Canada, South Africa and India are also getting a piece of the cake. I would like to mention Canada here. Platts has taken note of increasing liquidity of Canadian iron ore movements into China. We have proposed to launch a new Capesize dry bulk freight assessments to move iron ore from Seven Islands on Canada's east coast to Qingdao from Nov. 1, 2020.
Also, there is some market chatter on Chinese investments in West African mines, which should start exports in a couple of years or so. But we'll see.
SHRIRAM SIVARAMAKRISHNAN: Intesresting. So a bit more of longer duration origins - Canada and West Africa, which definitely should be welcomed by the Capesize shipowners.
Isaac, has this had any impact on the Panamax or Supramax market too - the very firm iron ore prices and big imports by China.
ISAAC IEO: Well, yes definitely they have. Not so much on the Panamaxes, but more so on Supramaxes. China's steel imports have also improved, and they've become a net importer of steel for June and July this year.
SHRIRAM SIVARAMAKRISHNAN: Intesresting. So the world's largest steel producer is also now a net importer of steel. It really does show the demand for steel within China. But given strong performance of the steel markets, especially in China, how have the coking coal flows been this year?
ISAAC IEO: Well, the coking coal prices have been sliding lower through most of this year largely due to lower demand from China.
The flows of coking coal have had its fair share of setbacks post-lockdown: some being the trade disputes between Australia and China, the crew change quarantine periods, as well as torrential rains in China creating logistical issues.
Lately, however, the flow has improved a fair bit particularly to India, who are fixing greater volumes through their government auctions. We have observed roughly 2 to 3 Panamax-sized vessels fixed daily through the month of July till the present. That has really been quite supportive of the Panamaxes.
There has also been some reluctance from shipowners to call Australian ports in the recent month after the Australian Maritime Safety Authority passed a notice in April restricting the maximum number of months a seafarer can serve aboard a vessel to 11. The notice has had the effect of increasing the rate of crew changes and causing delays and bottlenecking in ports especially in Manila where many ship operators look to for changing crew.
SHRIRAM SIVARAMAKRISHNAN: Yeah there is a lot of market chatter about how much longer it is taking to change crew in the Philippines lately. In June we were hearing it was taking 12 hours to change crew and by August that had become almost four days. Moving on to another major demand driver, which is thermal coal. Isaac what is your take on how those prices have been and how that's affected trade flows this year.
ISAAC IEO: Well to put it quite bluntly, the demand for thermal coal has been dismal through the year. Even in the current state, producers in Indonesia are struggling to keep the prices afloat through waves of production cuts. The prices are still pretty low, falling below the $20/mt mark for the lower CV coal, FOB Indonesia basis.
Prices have dipped so much in Indonesia that trading of seaborne coal has been stifled. Instead, power producers in India much prefer the cheaper option of lifting thermal coal from the existing stockpiles in India which have seen a tremendous build up during the peak of the COVID-19 lockdown period.
At its peak, the stockpile was close to 30 days' worth of coal burn according to data from the Central Electricity Authority in India.
We're now seeing a delayed recovery of dry bulk vessel demand to move thermal coal. India's coal-fired power generation is presently back to being at parity with last year's generation. However, the seaborne demand has not recovered fully to the same volume as we expected.
Moreover, Newcastle coal prices have stayed lower as compared to prices seen out of South Africa. That has encouraged traders to look at coal from Australia into the Indian subcontinent. So of those flows have even been performed on Supramax ships which has certainly helped that segment.
Overall, Platts Analytics is expecting total seaborne thermal coal demand to contract by about 75 million mt year-on-year so the outlook for coal is quite big compared to the other commodities.
SHRIRAM SIVARAMAKRISHNAN: Interesting. And especially interesting to hear that there are Supramaxes that are being fixed to move coal from east coast Australia all the way in to India. The Supramax shipowners will really welcome that.
So to sum up all the demand factors that we've seen so far, it loosk fairly positive for iron ore and grain but it looks a bit softer or slower on the coal front. But looking at some of the operational issues which are affecting the market, and this is the year 2020 after all, Carina what is your take on how scrubber fitted ships are facing the market this year?
CARINA LI: Well, Shriram, here I have to mention our Platts scrubber premium index for Capesize, Panamaxes, Ultramaxes and Supramaxes, which can well reflect the additional returns to shipowners with scrubber-fitted ships based on the spread between LSFO and HSFO fuel prices.
So this year, we've seen the Capesize scrubber premium index dropping from $12,000/d in early 2020 and has stabilized a shade below 3k/d since mid-March. The scrubber premium has shrunk due to a narrowing spread between LSFO and HSFO prices. And we can see now the scrubber premium negotiated between owners and charterers has switched to a lump sum amount.
Also, the 'Bunker Saving Profit Share Clause,' which was something that was up for contention at the start of 2020 has mostly vanished.
The lower returns for scrubber fitter ships will also prolong the payback time on the investment and has caused some players to even delay installments on their ships. Some owners have even stalled their scrubber installations despite having to pay a cancellation fee to the contracted shipyards.
SHRIRAM SIVARAMAKRISHNAN: So now for the most difficult question for you, Carina, how do think the Capesize market is going to move for the rest of the year?
CARINA LI: Okay, well, looking ahead, most market players are cautiously optimistic. Demand from iron ore is expected to remain fairly robust. Additional tons of bauxite from West Africa is also adding to the ton-mile demand. The Capesize market could do even better with some additional coal demand which so far this year has moved more to the smaller sizes, as Isaac just mentioned. COVID-19 and issues arising out of it is expected to keep supply side inefficiencies for the rest of this year, so the rates would be somehow volatile.
SHRIRAM SIVARAMAKRISHNAN: Thanks for that. The volatility should keep us glued to our screens for the rest of the year.
Isaac, how do you think the Panamaxes and Supramaxes are looking for the rest of the year?
ISAAC IEO: Well, on the Panamaxes, I think grain cargoes would continue to be the driver of the market. Grain purchases by China have been fairly robust this year and expectation is for the same to continue over the rest of this year. In July and August, there has been significant purchases of corn from US as well, and while the sales reported do not indicate the loading dates, the wider expectation of the market is for these shipments to happen during Q4 this year which should continue to support the Panamax market.
Now in the Supramax market in the Asia Pacific, it would continue to find support from iron ore cargoes out of India. The higher iron ore prices as well as tightening of credit facilities during COVID-19 period has generally observed a downward shift in cargo sizes. This has led to an increased popularity of smaller sized vessel demand, particularly on the Supramaxes.
Until the thermal coal imports into India surge, which at the moment is not the outlook, supply would stay tight on the Indian coast, which will keep the freight rates elevated.
There's been a lack of ships on the Indian coast and that has also helped to pull ships from Southeast Asia for coal out of South Africa and iron ore out of India. This increased ballasting has overall helped the tonne-mile demand.
Additional demand is coming from grain cargoes out of the Black Sea region and that is pulling ships opening in the Persian Gulf and west coast India.
SHRIRAM SIVARAMAKRISHNAN: Fantastic! Thanks, Isaac. So overall it does look like there's still some positivity to look forward to from an owners' perspective for the rest of this year with regards to the dry bulk market. Thanks for your insights, Carina and Isaac.
A more in-depth analysis of the dry bulk markets and its demand drivers is coming up on October 15, when we reconvene for the Platts Dry Bulk Forum which this year is going to be online. Details on how to sign up for this virtual forum, more news and analysis on the dry bulk markets, as well as information on our price assessments and methodology, are available on spglobal.com/platts. Thank you for your time today.