Capesize owners split by decision to fix or lay-up ships

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By Keith Wallis - Friday 28 November 2008

WHILE rates continue to plunge, capesize owners find themselves into two camps.
One group, including a large proportion of Asian owners, is prepared to still play the market, fixing time charter deals that at least pay the cost of vessel insurance. 
Owners in the other group have preferred to park their vessels in an attempt to ride out the worst of the storm. 
“Owners in the first group are prepared to accept lower rates to keep their crews and ships active,” one Hong Kong broker said. “The overriding consideration is to keep vessels operating to provide mental stimulation for the crews by keeping them busy.” 
The broker pointed out that owners in the second camp hoped that by parking vessels it will help rates to rise by creating a psychological shortage of ships. “But at the end of the day there’s still plenty of tonnage out there,” he said. 
Another Hong Kong broker discounted suggestions that owners were offering their ships for free provided charterers pay insurance and crew costs. 
“There are no sophisticated charterers, it’s a straightforward cash transaction based on a daily rate. The fact charter rates only cover insurance or crew costs is incidental,” he said. 
This came in response to this week’s fixing by Cargill of a Mitsui OSK Lines capesize relet at just $1,000 per day. 
At the same time, the average of the four time charter rates remained in freefall, dropping by around $1,000 in a week to close the week at $2,425 per day. 
The one bright spot as rates continued to slump was on the Western Australia to China trade, where charter rates showed a very modest rise on Friday of $0.02 to $3.89 per tonne compared with the day before. 
“We see a little bit of movement. Recent spot and time charter deals have soaked up maybe 10% of the ships that are on the availability list. So it helps, but there is a long way still to go,” said one of the Hong Kong brokers. 
“Traders are fixing some iron ore cargoes into China so they can reduce the average cost of their inventories. But that’s about it.” 
The broker pointed out that there was a surge in paper rates for the fourth quarter 2009 contract last Thursday. 
“The optimists thought it looked like the market was starting to pick up. But to others it looked the work of speculators and the positive sentiment quickly died,” he said. 
Fearnleys said the 176,000 dwt, 2003-built CSK Fortune was fixed by Oldendorff for a fronthaul voyage from Brazil to China at $5,750 per day with a $175,000 ballast bonus, but the broker said the bonus did not cover the ballast costs. 
The Norwegian broker added: “On steam coal, South Korea is the only light we see, with month-on-month volumes up by over 13%, though this only benefits the smaller capesize vessels due to port restrictions at the discharge port.”