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Namely, Capesize spot rates could rise above USD 25,000 per day in Q4 if iron ore exporters meet planned shipment targets, with the upside cascading into the Panamax market as shippers consider splitting ore cargoes, Maritime Strategies International said in its latest report on dry bulk market.

The dry bulk market continues to enjoy a strong summer, with average spot rates increasing in June for all benchmarks except Handysize. By early July, Capesize average spot rates surged to almost USD 25,000/day. Positive sentiment is evident in one year T/C rates too, which have maintained a premium over spot for all bulker benchmarks, MSI said.

China’s appetite for iron ore has been a core support to the bulker market, with Australian exports 13% higher year-on-year in June and Brazil up 2% yoy despite the loss of exports from the Minas Rio and Samarco mines.

Despite efforts to close outdated steel capacity in China, production has been extremely strong: May’s output was a record 81.1m tonnes, up an astonishing 12% yoy. “MSI remains positive for bulker demand in the second half of this year, with the principle increment coming from Australian and Brazilian iron ore to China, marginally offset by softer near-term coal demand and expectations that soybeans trade will be lower than last year,” says MSI Dry Bulk Analyst William Tooth.

“The supply-side outlook is broadly benign; MSI forecasts fleet growth overall in 2018 will be 2.3% yoy. There is limited upside risk to this view if scrapping underperforms, In an extreme low scrapping scenario fleet growth could be up to 2.9% yoy.” China’s import demand for iron ore and coal remains the key driver of bulker freight rates, so far offsetting any negative impact related to the brewing US-China trade war.

But MSI cautions that its forecast of Capesize spot rates above $25,000/day in December is relatively cautious given that its Base Case outlook assumes that Vale will miss its export target of 390m tonnes this year, an aim which it reiterated in early July. “Aside from Samarco, which will not restart output this year and the Minas Rio project, which has been closed for three months, the disruptions to iron ore trade in the first half of this year have broadly come to an end in Brazil,” adds Tooth. “As a result, the six-month outlook for Capesize freight rates is unquestionably strong, even though we think Vale will deliver less than predicted in Q3 and Q4. Overall we forecast Capesize spot rates of over $25 k/Day in December, but Brazil’s exports are a source of significant upside risk to this view.”