Capesize’s bullish run take a breather

Capesize market slowed after the recent rally in shipping rates, as trade sources seek for clearer market direction ahead. As such, the Capesize 5 time charter average slid slightly by $56 to $4,140 on Friday, as the market approached the long weekend. There was a prompt selloff of June contracts earlier in trading session, before finding some support later at previous days levels. With firmer Capesize rates, the Baltic Dry Index (BDI) went up but just shy of hitting the 500 mark, at recorded level of 498 ratings on Friday.   More clarity for port checks in China Custom checks for iron ore had become optional with effect on June 1, as Chinese authority sought to streamline services and facilitate trading. Under this ruling, importers have the options to skip the quality specification checks in saving time and costs, as iron ore products such as Pilbara Blend fines and Carajas fines tend to have stable quality specifications. Some trade participants felt that the new port policy will have limited effect on shipping fundamentals, while other felt that the saving of 1-2 days checking period may accelerate cargo trading.   Healthy Pacific market Despite the short hiccups in freight rates, the Pacific market remained healthy with good shipping demand from Australia and Vale’s Teluk Rubiah terminal at Malaysia. Mining majors, like Rio Tinto and FMG were heard to be still seeking vessels on the key west Australia to China route. Thus, the indicative freight heard on the west coast Australia to Qingdao route was at the range of $4.55-$4.70/wmt.   Higher bunker prices benefits from quick oil recovery VLSFO continued to climb and lent support to freight rates as VLSFO bunker prices increased by $5.50 on-day to $279.50/mt at the port of Singapore. The uptick in bunker prices were in line with higher crude oil prices, as Brent crude prices move up higher toward $36 per barrel level, while the WTI also hiked higher toward $34 per barrel. The higher oil prices reflected market optimism of quick gasoline recovery demand in the US and China. For instance, IHS Markit indicated that China’s April oil demand has rebounded back to 89% of April 2019 levels, while the US gasoline demand had reached 8 million b/d at last week, just slightly lowered than the 9-10 million b/d of the pre-coronavirus level.