Weekly market highlights Dry Capesize

October 2, 2024

This week’s market highlights provide an overview of the latest trends in the dry bulk Capesize vessel segment and the tanker VLCC segment at the end of September.

DRY CAPESIZE

The final week of September saw a marked improvement in the Capesize Brazil-to-China route, with tightening vessel availability supporting a more optimistic market outlook. The increase in tonne days, now surpassing the lows seen in August, indicates a rebound in demand. This heightened activity, coupled with constrained vessel supply, has reinforced an upward trend in freight rates, providing a favourable market environment as the third quarter concludes. Additionally, iron ore prices surged as China introduced significant monetary stimulus measures to combat economic slowdown and deflationary pressures. The People’s Bank of China’s largest stimulus package since the pandemic, aimed at reviving the economy, has played a key role in boosting commodity demand. Restocking efforts ahead of China’s national holidays have further contributed to strong demand and elevated market sentiment. With firm freight rates, limited vessel availability, and higher iron ore prices, the Capesize segment appears set for continued strength as we enter the fourth quarter. However, the market remains sensitive to China’s fiscal policies.

Image 1: Capesize Market Prices, ($/ton) 2023-2024

TANKER VLCC

On the VLCC tanker front, the market experienced upward pressure toward the end of the third week of September, though momentum has softened slightly before the end of the month. However, current AG-China WS rates are 8% higher than the same period last year, positioning the market favourably as we approach the winter season—a time traditionally associated with increased energy demand. The current momentum could extend into the coming months as oil demand typically rises during colder weather to meet heating and industrial needs. This seasonal demand, coupled with tightening vessel supply, may further drive freight rates higher.

One key factor behind this upward movement is the steady increase in crude oil shipments from the Arabian Gulf to China, which has been rising since August. As China continues to build its energy reserves and refineries increase production, the demand for VLCCs is expected to remain strong. As the world’s largest crude importer, China’s sustained demand will likely keep rates under upward pressure. A key driver of this upward movement is the steady rise in crude oil shipments from the Arabian Gulf to China, which has been increasing since August. As China continues to expand its energy reserves and ramp up refinery production, demand for VLCCs is expected to remain robust. Given China’s position as the world’s largest crude importer, this sustained demand is likely to exert continued upward pressure on freight rates.