Asia Pacific: Transportation: Shipping

Bulkers: Sentiment shifts on concerns of summer slump

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Seasonal rate weakness expected...
On April 28, we expressed our concern of the bulker sector correcting with
the anticipated summer slump in China Cosco: Spring Fling, Summer
Slump. We continue to expect a seasonal correction in the freight market.
However, the magnitude will likely depend on a few key factors:
1) timing of the completion of the iron ore negotiations;
2) the severity of port congestion; and
3) substitution of coal over oil. We believe ore negotiations will be the
primary swing factor.
... But the magnitude will depend: two scenarios
Scenario 1: Ore negotiations settle in June – The summer slump may be
pushed back by 4-6 weeks and be shorter than the market may perceive,
because incremental demand for Capesize ships will likely exceed the
available capacity, with many ships still at sea plying to and from Brazil.
Scenario 2: Further delay in ore negotiations – rates will likely correct soon
and more sharply than expected by the market. We would not rule out the
possibility for the BDI to retest the January low of 5,615.