Iron Ore trade
The outlook for global seaborne iron ore trade in 2011 is broadly positive, with imports expected to increase by 6% year-over-year.  Imports are projected to pass the 1 billion tonne threshold for the first time, to reach 1,047mt.  Chinese demand is expected to return to positive y-o-y growth, after noting a small decline in 2010.  Meanwhile, imports to the world other major steelmaking nations look set to show solid growth, as global crude steel output continues to increase.  That said,
European imports are unlikely to return to pre-recession this year.

Australia and Brazil will remain the foremost supplier of iron ore to the seaborne market, and are likely to account for around 70% of total shipments.
India is projected to export more than 100mt (million tonnes) of material for the fourth consecutive year, although the country's rapid-growing steel industry may result in large quantities of ore being used by domestic steel mills.

Thermal Coal market
As 2011 begins, it looks as though the current year will be a good one for seaborne thermal coal trade. Imports of steam coal are projected to reach 686mt representing a 5% increase on the last year.  Trade will remain dominated by the major industrial and developing Asian economies, with around 75% of overall shipments predicted to head to the Pacific basin.  However, there are likely to be two major changes to trade patterns witnessed in 2010.

Growth in Asian demand, which provided a major boost to the dry bulk market in 2010, is set to slow this year.  Whereas imports to the rapidly-expanding India and China are expected to rocket once again, slower growth is expected in the more advanced Asian economies.  Imports to South Korea, for instance, could remain flat at around 80mt, whilst those to Japan might actually fall slightly, as the increased availability of nuclear power reduces demand for imported coal.

Capesize fleet feels the force of ordering binge
On the face of things, 2010 was not such a bad year for the Capesize owners.  Spot earnings for a moderns vessel averaged $30,668/day for above operating expenses and reasonable financing costs.  This compares to average earnings of $20,221/day for Panamaxes and $19,177/day for Handymaxes.  Yet a closer analysis of 2010 data reveals a less rosy picture for the Capes.  Whereas the smaller bulk carriers earned almost a third more on average in 2010 than in 2009, Capesize earnings were substantially down year-on-year.  As the graph shows, the earnings differential between Capesizes and Panamaxes declined drastically: in 2009 a modern Capesize could expect to earn 61% more per day than an equivalent Panamax; last year, however, this premium fell to just 34%.

Too many Capes in one basket
The bloated Capesize fleet is, of course, the primary cause of the dramatic fall shown on the graph.  Between 1st of January 2009 and 1st January 2011 the global Capesize fleet grew from 143.4m dwt to 208.2m dwt, a staggering 45% increase in two years, as the record number of ships ordered prior to 2008 entered service.  Panamaxes proved rather less popular in the dry bulk boom years, meaning that the Panamax fleet grew by a comparatively manageable 18% over the last two years, up from 114.5m dwt of Capesize tonnage hitting the water in 2010, compared to 15.2m dwt of Panamax tonnage, it is little wonder that the earnings gap between the vessel types narrowed.

No picnic for owners
The shifting balance of bulker earning power in 2010 was exacerbated by divergent growth rates for trade in various commodities.  Whilst iron ore trade grew by 8% y-o-y, this was outstripped by a huge 14% increase in coal trade, as a resurgent global steel industry and voracious Asian demand for thermal coal drove up imports.  Meanwhile, grain imports rose by 8%, the largest y-o-y increase since 2006.
So, the huge growth in commodities shipped predominantly by Panamaxes more than compensated for the expanded fleet, allowing earnings to rise compared to 2009 levels.  By contrast, an additional 82mt of iron ore was insufficient to absorb the unprecedented amount of new Capesize tonnage that hit the water.

2011: A Charterers' party?
What's more, these trends look set to continue into 2011.  The Capesize fleet is again set to grow at a faster rate (in dwt terms) than the Panamax fleet: the Capesize orderbook as a percentage of fleet is currently 62%, compared to 56% for the Panamax orderbook, and fully 36.9m dwt of new Panamaxes.  Of course, any number of factors could change the negative outlook for the Capesizes this year: after all, were it not for the stimulus package in 2009, Cape rates would have fallen more sharply than they did.  That said, market fundamentals point towards an even closer convergence between Capesize and Panamax earnings in 2011.

source: CLARKSON Reasearch Services Limited