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After April’s rather discouraging picture for Capesize rates, shippers are happy to see some significant improvement this month. The demand for steel in China continues to grow, resulting in improved margins for domestic steel mills and pushing up crude steel production to 832m tons, record levels. Iron ore stocks of 110m at ports were giving much cause for worry but now that iron ore inventories at the mills have hit record lows, fears have eased considerably. Imported iron ore prices have fallen by 8.4% and HRC prices have risen by 1.7% MoM. The picture for grain shipments from South America was fairly abysmal in the first quarter. Argentinian exports were down 35% from the same time last year, to less than 10mt, with cargoes remaining at ports. All of this pushed down Panamax rates, which remained weak at $7kpd. Nevertheless, market analysts expect grain shipments to increase, contributing to an optimistic outlook for second half 2104 within the industry. 

Already, market improvement is contributing to a recovery in the BDI and the strengthening of Capesize rates. BDI hit 1,017 last week, an improvement of 5%. The absence of long-haul iron ore cargoes going from Brazil to China served to depress Capesize rates, even though, overall chartering activity was steady. Filling in the gap created by Brazil’s absence of shipments was Australia, whose cargo activity has been slowly growing. April saw 82 spot charters, up from the 78 in March, with 76 going to China, versus 66 shipments in March. The picture for Capesize rates continues to improve, as last week’s rates rose to $12kpd, up 19% WoW, due primarily to a total of 44 new spot cargoes going out primarily from Australia.