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Dry Bulk Q1 commentary

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• Q1 period rates for bulk carriers have increased across the board, capesize rates are up 42% compared to the same period last year. However, the smaller sizes have seen the biggest jump in rates with handysize timecharter rates for one-year almost doubling year on year to an average of $14,450/pdpr for Q1 but peaking at $16,750/pdpr at the end of mark, the highest levels seen for this sector since 2010.

Iron Ore

• Demand for iron ore remains tightly correlated to the global economy and also construction in China. Beijing had planned to reduce crude steel output in 2021 in an effort to meet green goals going forward but at the moment the target seems unrealistic as steel production rose 15% year-on-year in Q1.

• Q1 Iron ore production from Vale was 14.2% higher year-on-year and production guidance for 2021 remains at 315 to 335 Mt which is good news for the cape sector. However, Vale have a history of missing the guidance levels and with Covid cases soaring in Brazil, it remains to be seen if the miner will be able to achieve production targets.


• Coal- Whilst European countries are reducing coal consumption, Asian countries are using increased amounts. The latest Global Energy Report from the IEA indicates that coal demand is on a course to rise 4.5% in 2021 with more than 80% of the growth concentrated in Asia. China alone is projected to account for over 50% of global growth.

• The Chinese ban on Australian coal continues despite speculation that it would be relaxed. Domestic coal prices are surging well ahead of imported coal costs with the summer peak demand season fast approaching and many are waiting to see how Chinese seaborne demand will react. Chinese coastal coal trades have almost doubled from 2020 and in order to fulfil the demand increasing amounts are being imported from Indonesia and even Columbia and South Africa. Although rumours surrounding a lift in the ban persist, it seems that the situation will remain unchanged for the forthcoming quarter at least.


• The latest customs data from China’s General Administration of Customs indicates a surge of Chinese imports for soybeans and grains such as corn and wheat in Q1, China is the world’s leading importer of soybeans. Soybean imports i to China in March 2021 were up 82% from last year thanks to strong demand from the livestock sector.

• Brazil has been a key driver in panamax rates but heavy rains in Brazil early in Q1 have delayed harvests and therefore exports. The country then experiencing considerable port congestion with just over 120 panamax estimated to be waiting to load mid-March.

• US soybean sector is predicting record exports of around 36mmt to China despite trade sensitivities between the two countries.


A number of factors have led to revival in dry bulk rates for Q1 2021, including increased iron ore cargo flows from Australia and Brazil to China, a surge in demand for dry bulk commodities following last years lows, port congestion in China and Brazil and trade tensions between Australia and China that have altered coal cargo trade routes at least for the time being. Opinion is split over whether we are entering a commodity super cycle or simply experiencing a restocking of resources following the plunge in demand as a result of pandemic related lockdowns. Nevertheless, it is encouraging to see such a strong market during Q1 when dry bulk rates are traditionally low, it will be interesting to watch where the market heads in the coming months as any additional demand could really have an impact.

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