Dry bulk charterers optimistic

Dry cargo

Figures are now emerging for dry bulk shipping during 2004.

The star of the show has clearly been the steel industry. For the first time, worldwide steel production has exceeded 1,000 million tonnes.

The components which are necessary for steel production, especially iron ore and metallurgical coal, have therefore been shipped into steel production areas in record amounts, mainly in Capesize and Panamax bulk carriers.

If the star of the show has been steel, the brilliant stage has been China. Their steel production leapt by more than 50 million tonnes to the point where some commentators are saying a quarter of the world's production comes from that country alone.

This economic growth has also affected Handysize and Handymax bulkers with their carriage of steel products and scrap, aluminium, alumina and bauxite, coke and coal and all the other products necessary for manufacturing economies.

Foodstuffs should not be overlooked though. Grain shipments have increased by over 15 per cent in the last year.

After a disastrous harvest in 2003, Australia has improved, and Brazil and Argentina are also making a strong showing.

Although rates have eased across the board recently, there is still a great deal of confidence as charterers still employ all classes of bulk carrier on longer term timecharters a positive sign.

VLCC

This week's market appears at first glance, to mirror last week's. There was plenty of activity with an above-average number of VLCC fixtures concluded, but rates from the Arabian Gulf remained more or less steady.

Freight rate levels seem to have stuck in the low to mid Worldscale 60's for both Eastern and Western destinations.

Rates should firm up in the next week or so. The main influence is the West African market. There seems to be plenty of enquiry in the Atlantic basin and rates are holding up well.

Currently a voyage from West Africa to the US Gulf is paying about Ws 100. Owners therefore appear reluctant to ballast their ships back to a poorer market in the Middle East.

The tonnage supply figures should therefore begin to shrink in the AG, thus placing upwards pressure on rates.

Another influence on rate levels has been the Opec cutbacks. Cargo sizes have been reduced rather than whole cargoes withdrawn from the market. This has assisted the smaller, single hull vessels which have been quite happy to revel in their new-found popularity.

They are quite willing to accept lower rates, but because of their lower running costs, attract similar profit margins to larger, more modern ships.

With some of these modern vessels now being occupied with a better income in the Western Hemisphere, a two-tier market may become more evident in the Gulf with AG/West voyages paying a premium for double hull types.

Suezmax

In the Arabian Gulf, there was some competition between small VLCCs willing to take part cargoes and Suezmax vessels. This competition has eased now and rate levels have steadied to about Ws 120 for long-haul cargoes and Ws 130/135 for Indian destinations.

The main influence over the Suezmax market in the Western Hemisphere has been the recent bad weather in the Dardanelles and the Bosphorus.

Transit delays have penned up Suezmax ships in the Black Sea for up to twenty days. These delays have reduced the tonnage availability and pushed rates up sharply.

They reached a peak of Ws 225 for voyages from the Black Sea to the European Med or north-west Europe.

The weather has now improved and transit delays have halved to about ten days thus bringing more tonnage to the market. Rates should fall back in the next week or so, weather permitting.

In other areas in the West, rates had risen as a knock-on effect of the Turkish Strait's delays. These are also beginning to ease and with VLCCs becoming more popular in West Africa, the correction may be quite sharp.

An increase in the number of VLCC fixtures (twelve for February loading against seven for January loading) will surely have such an effect.

There are Suezmax-specific cargoes, however, especially to both coasts of South America and to the Atlantic coast of the USA which will slow down the rate of fall and levels should even out at about Worldscale 140 for West Africa to US Gulf fixtures.

Aframax

It has been a dismal week for Aframax tonnage in the AG and the Far East. A combination of too much tonnage and too few cargoes has driven rates down to Worldscale 130 for AG to the Far East voyages and Ws 115 for Indonesia/Japan on a normal 80,000 ton cargo size.

In the Western Hemisphere, it was a different story. The weather that affected Suezmax tonnage, also caused delays to Aframax ships.

Rates of Ws 300 were seen for Black Sea loaders and this spilled over into voyages from the Mediterranean loading areas.

With better weather, we are now seeing lower rates and already Ws 290 has been reported from the Black Sea and Ws 275 from the Med.

It must be said that these rates look attractive and will draw in vessels from the rather lacklustre markets of North West Europe and the Caribbeans, thus causing rates to fall more quickly.

In the UK Continent loading areas, there has been a wintertime two tier market with ice-class and non-ice class vessels going their separate ways.

The ice-class ships working out of north Russia and the Baltic have been attracting rates of about the Ws 400 mark for a few weeks now.

Rates for non ice-class have drifted lower and lower in the same period and this week have fallen from Ws 150 to Ws 135 for short haul voyages. 80,000 ton parcels to the USA have fared better with Ws 235 or 240 being paid for high quality tonnage.

In the Caribbeans, the usual 70,000 ton cargo size from Venezuela or Mexico's east coast to the United States has drifted down to Ws 155 or 160 and there is no sign that cargo volumes will increase, despite the heavy snow and ice affecting the northern US and Canada.

The writer is a shipbroker and marine consultant with more than 40 years' experience in the tanker and dry cargo markets.