The magnitude of the boom, with demand searing almost everywhere thanks to a broad economic recovery and extensive stimulus programs, has stretched global shipping, with products such as soybeans and logs competing with traditional cargoes of coal and iron ore. This surge also highlights the pressures exerted by the raw materials industry to cope with this growth.

“Industries replenish both finished products and raw materials, which stimulates freight movements. Volumes are above pre-pandemic levels, ”said Burak Cetinok, head of research at Arrow Shipping Group Ltd.“ In the past 12 months, demand for bulk carriers has been mainly driven by China, but now the rest of the world joined in with a strong rebound in demand for industrial raw materials. “

The Baltic Dry Index, a measure of the cost of transporting everything from crops to raw materials, rose to 3,240 points on Monday, just below its nearly 11-year high set on May 5.

Grain ore
Australian iron ore exports, a vital trade for bulk shippers, are expected to pick up in May-June as exporters look to meet their year-end targets, said Abhinav Gupta, research analyst at Braemar ACM Shipbroking.

The growth in trade in bauxite, coal and grains, supported by the recovery in global and Chinese demand for minor minerals and other bulk, will keep the supply of ships tight and support a high freight market in the short term, did he declare.

This has increased the tariffs for small carriers and with it the Baltic Dry index, which covers the main classes of freight transport.

“The index has improved remarkably, supported by growth in maritime commodity trade which has fueled the rebound in freight rates for all dry bulk segments, particularly the larger ships,” said Gupta. “We expect Cape Town freight rates to either increase or remain firm in the coming weeks, which will push the Baltic Dry Index even higher.

Stark inversion
Capesizes freighters, 1,100-foot carriers built to carry hundreds of thousands of tonnes of raw materials, earn more than $ 42,000 a day, according to London’s Baltic Exchange. Rates slipped slightly on Tuesday, but are still near highs since at least 2013 and almost certainly longer. The Baltic Exchange has changed the way it formulates some of its prices in recent years, making historical comparisons imperfect.

Iron ore jumped to around $ 230 a tonne this week, breaking its previous record as Chinese factories ramp up production to take advantage of soaring profit margins.

Sanford C Bernstein, who tracks iron ore shipments ship by ship, said he expects 5.1% more of steel raw material to be transported by sea in the second quarter compared to the first .

Yet soaring commodity prices are fueling fears of inflation, and questions are being raised about the need for a central bank response. The rally is also a threat to China’s economic growth, and the world’s largest commodity consumer has already tried to temper prices.

If commodities start to cool down, shipping prices could be one of the first indicators, according to Colin Hamilton, analyst at BMO Capital Markets.

“We see freight as an important market to watch for any signs of demand destruction in a high price environment,” Hamilton said.

The rebound marks a sharp turnaround in fortunes for a sector of the shipping industry that saw rates drop to a four-year low less than 12 months ago. Homeowners saw vast overcapacity build up in the financial crisis that took years to subside and keep rates depressed.

The market is so strong right now that owners are keeping older ships in service that could have been scrapped in weaker markets, said Peter Sand, chief shipping analyst at Bimco, the largest international shipping association. in the world.

“Everything is going in the right direction for bulk carriers right now,” Sand said, adding that the purchase from China will determine the length of the boom.