Following the tragic Brazilian dam disaster in late January, which closed mining operations and drastically reduced iron-ore exports to China, Capesizes rates plunged. In the Panamax segment, trade tensions slashed exports of U.S. soybeans to China via the Panama Canal. Instead, China bought soybeans from Brazil and Argentina, which are transported on a longer route around the Cape of Good Hope.

Brazilian iron-ore exports to China then came back online abruptly, and there were not enough Capesizes in the Atlantic Basin to carry the revived cargo flow, causing rates to rebound sharply in May through early September. As Capesize rates rose, shippers began splitting cargoes and putting them on two Panamaxes instead of one Capesize, causing a positive trickle-down effect for Panamax rates.

By mid-September, however, more than enough Capesizes had repositioned into the Atlantic to handle the Brazilian iron-ore business and rates retreated. Consequently, shippers had no incentive to split Capesize cargoes into Panamax loads, so Panamax rates fell.

A significant number of Capesizes were expected to be out of service by now for scrubber installations, but it turns out that most of the out-of-service time is yet to come. The more bulkers at the yards, the fewer there are competing for spot cargoes, and the higher the rates.

Jefferies analyst Randy Giveans also pointed to a major increase in installations ahead. “The ramp-up is certainly expected, as there have been considerable delays [in installations], which have pushed the retrofit schedules out and have increased off-hire expectations from 30 days to 40 days per vessel,” he told FreightWaves, pointing out that “large container ships and tankers were first in line, and delays with those caused a domino effect of delays for bulkers.”

Another potential positive: The Chinese coal quota narrative is not as onerous as it may seem, maintained John Wobensmith, CEO of Genco Shipping & Trading (NYSE: GNK). During the conference call with analysts Nov. 7, he said, “We all see coal being cut back. We’ve been talking about this for six months because of the quotas. But keep in mind that in Southeast Asia, particularly Vietnam, those numbers continue to move up by double digits, and Indian coal imports continue to move up significantly — so it’s not just about China.”

Finally, according to Kartsonas, there could be seasonal upside that boosts rates, at least a little, in the next two months. “I believe there will be a small rally towards the end of the year,” he affirmed.

“The reason is that I think there is seasonality in dry bulk. I think there is a weather element in the winter, both in the Atlantic and in China, where you do have delays,” he explained. Port delays remove vessel supply from the market; the less vessel supply, the more the supply-demand balance shifts in favor of vessel interests in rate negotiations with shippers.

“I also believe there is more coal demand in the Atlantic because of weather. You see European utilities stockpiling ahead of winter and you get higher trans-Atlantic demand. Historically, rates from North and South America to Europe are very seasonal and pick up from mid-November until the end of December.