Dry bulk problems run deeper than Vale dam disaster

Headwinds facing the dry cargo market extend beyond the impact of the Feijao disaster, Braemar ACM says.
Dry cargo rates have been in a tailspin this year with the Baltic Dry Index slumping to just 601 points on Friday.
Bulker owners in no mood to celebrate Chinese New Year Vale says Brazil court action threatens 30 million tonnes of iron ore outputCapesize vessels are earning just $8,200 per day with futures markets presently showing no indication of any upward momentum into the second quarter.
“The tragic failure of Vale’s tailings dam at Brumadinho has been a key event in what was already a difficult start to the year for the freight market. But the dry market’s problems run deeper,” said James Johnston of Braemar ACM.
He says the tragedy has been viewed as a major source of the present woes, but the greatest declines have actually occurred in the smaller asset classes, particularly panamax bulkers.
“They now trade at near three-year lows despite being largely unaffected by the potential impact on iron ore shipments,” Johnston said.
Panamax rates rose a little on Friday $6,128 per day, according to the Baltic Exchange, which noted a surprise improvement in the Pacific market this week.
“In reality Brumadinho comes at a time of deep market uncertainty, with the problems starting in Q3 last year,” Johnston said.
“Afterall, in early September 2018, the Cal19 Capesize FFA was trading at over $21k per day.
"Two and a half months later it had dropped by a third to just over $14,000 per day. It now prices at around $11,000 per day, so the big drop in value came last year rather than now."
He described the loss of life at Brumadinho as a timely reminder to the mining industry to look care-fully at its safety obligations.
"We wish for a speedy resolution for the devastating human impact. But we must be careful not to overstate its role in the dry market’s current predicament,” Johnston concluded.