More than $6,000 per day was wiped from spot earnings to leave rates 50% shy of where they started the year.
“Capesizes are in freefall,” said one dry cargo expert.
He tells TradeWinds seasonally low iron ore demand in China, coupled with weather disruptions in Australia and Brazil and fresh issues with Colombian coal exports are all hurting the market.
The addition of the ban on Drummond’s exports from Colombia is not sufficient to slice such a chunk off the capesize market in one day, the export says.
“This is sentiment based too,” he said, suggesting the market has adjusted to what it might experience over the next couple of weeks.
Omar Nokta of Global Hunter Securities said in a report today: “The pressure has been somewhat expected, as FFAs had indicated a Q1 average of $15,000/day coming into 2014 (Q1 is at $13,000/day currently)."
“Previously, the question was would FFAs go up or rates come down? Now we have our answer,” the export said.
More to come
Ben Nolan, an analyst at Stifel, says with Chinese iron ore inventories high the decline in spot rates is likely to continue in the near term.
As TradeWinds has reported, Colombia has suspended Drummond’s coal loading activity until it comes into line with new regulations.
“Colombia exports approximately 80 million tons of seaborne coal per year, the majority of which is transported on capesize and panamax vessels,” Nolan said. “Thus, we estimate as much as 1% of global dry bulk demand could be offline until the company is in compliance in March.”
Further complication is being added to the smaller asset classes as Indonesia bans exports of unprocessed minerals, a move which has already seen a reported 10 Chinese vessels detained.
Nolan says Indonesian nickel ore exports run to 60 million tonnes a year, with bauxite at a similar level.
“The majority of the nickel ore exports are performed by the medium-sized supramax vessels, while bauxite exports are typically panamax or supramax cargoes, with China being the primary destination for both,” he said.
“Although we expect some easing in the restriction at some point, we estimate that the near-term impact could be detrimental to the already softening dry bulk rates.”