Capesize bulker rates could mount a rebound if Brazil continues to pump more iron ore into the spot market, an analyst says.
The ray of hope from Maria Bertzeletou, a market analyst for Greek commercial data platform Signal Ocean, came on the same day that capesize spot rates slumped to their lowest point in two months.
The Baltic Exchange assessed rates for the Brazil to China route at $20,300 per day on Wednesday, a 7% dip since the day before and a 29.6% plunge since the trade peaked at nearly $28,900 per day in late September.
But Bertzeletou wrote in a market update that rising iron ore exports from Brazil, which mounted a strong third quarter, could combine with increasing port congestion to put upward pressure on rates.
“Despite the current rate decline, the iron ore flows from Brazil to China present a compelling narrative,” she wrote.
“On a quarterly basis, the third quarter of 2024 saw the highest volume of iron ore shipments to China, surpassing 40m tonnes for the first time since 2021.”
She wrote that the volume of iron ore exported from Brazil to China increased 12% in September compared with the same month last year, despite challenges in Chinese demand as a result of the country’s property crisis.
Rio Tinto, the leading exporter from Western Australia, has also boosted its iron ore production.
But the Brazilian gains contrast with a 28% year-over-year slump registered in April.
“This sharp rebound demonstrates the renewed vitality in iron ore exports, with Brazil playing a central role in China’s steel making supply chain,” the analyst wrote.
And iron ore export growth could lead to higher congestion at Brazilian ports, which Bertzeletou said could lead to upward pressure soon. Signal data shows vessel congestion has already doubled since September.
Still, futures on the Brazil to China trade shed some of their optimism on Wednesday.
November contracts dipped $0.72 to $24.23 per tonne, while December forward freight agreements (FFAs) lost $0.57 to $24.14 per tonne, both of which represent a small increase on the day’s spot rate of $23.96 per tonne.
But Oslo-listed 2020 Bulkers, an owner of large bulkers, was more optimistic in the face of the futures dips, noting that there is plenty of cargo, and exports from Guinea are also up 13% compared with the same time of 2023.
“We expect healthy cargo also in Q4,” the shipowner said on X. “FFA seems to approach over-sold levels, as fundamentals are looking good.”
