After strengthening modestly in July and August, the dry bulk market went through the roof in September and October, with fleet utilization topping 99% and Cape rates skyrocketing above $80,000 per day! The current boom is somewhat reminiscent of the tanker market boom earlier this year, as it has been driven by a combination of strong market fundamentals and a unique set of special factors.

Certainly, soaring Chinese steel production and iron ore imports have given the market a big boost. But special factors have also played a key role in the market’s recent rise. These factors include:

·         Increased port delays, with fleetwide waiting time rising by an estimated 5% over the past few months. These delays have been concentrated in Australia, Brazil, and China, and have reduced the amount of tonnage available for trading by an estimated 6.5 million dwt, or more than 2% of the dry bulk fleet.

·         High Japanese steam coal imports, in response to the continued shutdown of most of Tokyo Electric’s nuclear power plants. These imports jumped by 23% in the third quarter alone.

·         A disruption in Chinese coal supplies, due to a mine explosion in late August. This has led to increased Chinese imports, while other Asian countries have turned to longer-haul supplies.

We discuss this issue further in our October quarterly report, which was sent to our clients in early November.