Dry bulk iron ore freight rates inch up w-o-w on vessel shortage

• Baltic Capesize index up by 275 points w-o-w
• Spot iron ore prices in China witness marginal correction

Dry bulk iron ore freight rates from India to China increased this week, driven by robust demand and limited vessel availability in the Asian market, which continues to support higher rates.

While the US Gulf saw a slowdown due to reduced enquiries, the Mediterranean-Continent region gained momentum with increased activity. Tightening supply of tonnage in Asia has strengthened owners’ negotiating positions, contributing to the upward trend in Supramax iron ore freight rates.

The increase in Capesize vessel freight rates is driven by a tighter tonnage list in the Pacific due to a healthy volume of fixtures late last week, reducing vessel availability. Although market activity was limited, with only a few operators and one major miner participating, the gap between bids and offers supported rate growth.

Factors influencing freights

• Baltic indices rise w-o-w: The Baltic Dry Index (BDI) was recorded at 981 points on 24 February, increasing by 189 points w-o-w. Meanwhile, the Baltic Capesize Index (BCI) stood at 991 points, rose by 275 points w-o-w. Additionally, the Baltic Supramax Index (BSI) climbed by 121 points w-o-w to 886 points, reflecting positive market sentiment.
• China’s iron ore spot prices inch down w-o-w: China’s spot prices of iron ore fines (Fe62%) were assessed at $106.85/t CFR on 25 February, dipped by $1/t w-o-w due to weak buying activity following mills’ need-based procurement. Adverse weather has hindered Australian shipments from recovering, supporting the premium for medium-grade fines. The buyers are adopting a wait-and-see approach ahead of the Two Sessions meetings and prices may rise in early April due to expectations from these sessions.

Route-wise updates

• India-China: Freights from the Indian Ocean to China were recorded at $10.7/t, up by 0.7/t w-o-w. However, no fresh fixtures heard in this route. Some indications were even heard at $11-11.5/t levels
• Australia-China: Freights for Capesize vessels carrying iron ore from Western Australia to China were assessed at $6.7/t on 26 February, increasing by $0.7/t w-o-w. According to sources, Australian miners BHP were seen actively booking Capesize vessels from a Western Australia port to Qingdao Port at around $6.30-6.35/t. Shipment is scheduled for 6-9 March.

• Brazil-China: Freights for Capesize vessels from Brazil to China inched up this week. Rates from Tubarao to Qingdao Port were assessed at $17.35/t on 26 February, climbed by $0.35/t w-o-w. As per sources, The increase in Capesize freight rates from Brazil to China is driven by tightening vessel availability and rising forward freight agreements (FFA), coupled with sustained demand from major iron ore exporters.
• South Africa-China: Capesize freights from Saldanha Bay Port to Qingdao Port remained firm w-o-w at $11.74/t amid limited supply of available vessels, which strengthened owners bargaining positions.