New Vale capacity and slowing fleet growth feed bank's optimism.
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| Doug Mavrinac of Jefferies Photo: Chris Preovolos |
Analyst Doug Mavrinac forecasts the ships will earn $14,250 per day on average this year, the highest since the $15,512 per day logged in 2013.
Further progress is projected in 2018, with rates forecast to average $18,000 per day, according to the bank’s latest quarterly update.
Writing in the report, Mavrinac says robust demand for iron ore and coal drove the market in the third quarter at a time of muted fleet growth.
“We continue to believe the near-term outlook for the dry bulk carrier market remains attractive given improving global economic conditions and continued Chinese preference for high quality dry bulk commodity imports combined with virtually non-existent dry bulk carrier fleet growth into YE 2017,” he said.
With Vale’s S11D mine adding 10 million tons of iron ore to the market this year and a further 40 million tons next, this should be a sufficient ton mile driver as fleet growth slows to 1% in 2017 and 2018.
“Consequently, even with uncertain dry bulk trade growth expectations in the near-term, we believe the intermediate-term outlook for the dry bulk carrier market remains attractive heading into YE 2017 and 2018,” he said.
Dry cargo rates continued to soften today with the Baltic Dry Index falling 2.5% to 1,356 points.
It comes at the end of a week which saw China plan to cancel one-third of its iron ore mining licenses.
Michael Pak of AXIA Capital Markets says the development fits the thesis that the usage of domestic iron ore has been set for secular decline and the demand for iron ore imports should benefit.
“BHP Billiton, the world’s largest mining company, expects a flight-to-quality in the iron ore market as China continues to push pollution curbs and steel mills with larger furnaces,” he says.
“These large furnaces require higher quality raw materials. In our view, the shift toward imported, higher quality ore benefits capesize vessel class.”
source: www.tradewinds.com