Dry bulk market's revival

The dry bulk freight market is showing increasing volatility after slumping earlier in the year. Peter Norfolk of SSY looks at the reasons why

A fter an extremely depressed start to the year, the dry bulk freight market has shown renewed levels of volatility in 2009, driven by fluctuations in freight rates for Capesize vessels, the largest ship type used for transporting dry bulk commodities. The average time charter earnings for 'Capes' moved from $9,000/day at the start of the year to peak at $93,000/day in early June. By mid-August this had slipped to $43,000/day (see figure 1).

Freight rates for smaller vessel sizes have also shown volatility this year, albeit to a lesser degree than for Capesize tonnage. Panamax earnings averaged $4,000/day at the start of 2009 but peaked at $28,000/day towards the end of July, before falling below $19,000/day in mid-August. The average earnings of the smaller capacity Supramax class of vessels also began the year at $4,000/day, rising to $22,000/day in late-July, before declining to less than $18,000/day in mid-August. Similarly, Handysize average earnings of $4,000/day at the start of the year compared with a peak of almost $13,000/day at the end of July and $12,000/day in mid-August.

Capesize spot-freight rates on the Richards Bay/Rotterdam coal export route, known as C4 in the basket of rates assessed daily by the Baltic Exchange, have averaged almost $12/tonne so far this year, ranging from a low of $6.25/tonne at the start of January to a peak of $22.50/tonne at the start of June. Volatility has been reflected in the biggest daily rise in the year-to-date of almost 21%, or $2.18/tonne, at the start of May and the biggest daily fall of over 8%, or $1.59/tonne, one month later.

 

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