There are two main reasons for Capex rates being so high right now.
One is the new demand out of Brazil - see article below:
Baltic index extends gains on capesize, panamax demand
in Dry Bulk Market,International Shipping News18/07/2019
The Baltic Exchange’s main sea freight index rose on Wednesday, driven by demand for capesize and panamax vessels.
The Baltic index, which tracks rates for ships ferrying dry bulk commodities, rose 2.6%, or 53 points, to 2,064, its highest since January 2014. The index has surged about 60% this year.
The index extended gains for a seventh straight session, mainly driven by strong demand for vessels that ship iron ore from Brazil.
A restart of Vale SA’s Brucutu mine in Brazil that was shut in early February after a tailings dam burst, has prompted increased demand from the country.
The capesize index rose 127 points, or 3.2%, to 4,095 points, its highest since December 2017.
Average daily earnings for capesizes, which typically transport 170,000 tonne-180,000 tonne cargoes such as iron ore and coal, rose $916 to $31,073.
Iron ore shipments to China from Australia’s Port Hedland terminal rose more than 11% in June from a month earlier, port data released on Wednesday showed.
The panamax index rose 33 points, or 1.6%, to 2,085 points, its highest since December 2013.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, rose $265 to $16,661.
Tight spot market for capesize vessels has driven iron ore shippers to book panamax vessels, driving rates higher, analysts said.
The supramax index edged 23 points higher to 928 points.
Source: Reuters (Reporting by Karthika Suresh Namboothiri in Bengaluru; Editing by Maju Samuel)
https://www.hellenicshippingnews.com/baltic-index-extends-gains-on-capesize-panamax-demand/
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The other reason is the rush to comply with the IMO 2020 requirements from Jan 2020 when all shipping have to cap sulphur emissions from the oil/fuel that they use. As a result many vessels (including Capesize) are out of operation in the Atlantic & currently being retro-fitted with 'scrubbers' which can clean their fuel emissions on the ship. Other ships will switch to higher cost lower sulphur fuels - see info below from BHP's website:
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Freight
The dry bulk freight market remains in modest over–supply, but it seems evident that the absolute trough in freight rates is well behind us. Policy–led dock capacity rationalisation in China is one factor in this assessment. Sustainably higher global steel prices, generated by China’s industrial reform, will also help prevent new build costs falling again to the lows of a few years back15. Balancing that, there is still an overhang of shipbuilding capacity globally; and steady increases in average vessel size continue unabated. A wave of new deliveries are also scheduled for calendar 2019. And on a final point, the downward vulnerability of freight rates when the bulk trade is temporarily disrupted, as it was in the December quarter, is not indicative of a market on the precipice of a sustained period of tightness.
The route from Western Australia to Qingdao traded an approximate range of $6 to $10/t in calendar year 2018. Rates on C5 averaged $8.39/t in the second half of the calendar year, 19 per cent higher than in the first half. For the full calendar year, C5 was 14 per cent higher YoY.
Panamax and Supramax rates have traded in a much narrower range than Capesize, while lifting solidly YoY. They averaged $11,500/day in the 2018 calendar year, up from $9,500/day in 2017.
BHP chartered vessels will be fully compliant with IMO 2020. There are three compliant responses. (1) Use compliant very low sulphur fuel oil (VLSFO). (2) Install scrubbers. (3) Retrofit or new–build for LNG.
We expect the majority of ship–owners will choose to bunker compliant, low sulphur fuel oils. There is a ceiling on the proportion of the fleet that will choose to install scrubbing capability (with the number limited by dry dock capacity, scrubber availability, and the economic challenge presented by the need to dry dock a ship that would otherwise be working). This subset may well have become even smaller with China and Singapore recently moving to ban open–loop scrubbers.
We estimate that IMO will add between $2–3/t to WA–China freight & $4–5/t to Brazil–China. An outward Brazilian voyage using ‘scrubbed’ high sulphur fuel oil will be more competitive than the $4–5/t cited above.
We continue to engage proactively with sovereign entities and other regulators to leverage technological developments and promote improvements in safety and sustainability standards. We engage bilaterally and through our participation in Rightship
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While the distance from Quebec to China via the Suez canal is not much more than from Brazil, many ships travel the route via South Africa as is longer but actually cheaper than the high cost of using the Suez canal. For example, the capesize vessel 'Magnus Oldendorff' currently located in the Malacca strait on way to Japan with CIA's ore, just used this route around Africa rather than the Suez.
High shipping costs look set to be the norm for CIA & the other Canadian IO producers in the future (40% or more of the total cost of delivering Iron Ore to China/Japan, in my opinion).
CIA is high grade ore with a growth plan & thus long-term share price growth - that's why I'm interested.
If I wanted a low-cost producer with decent dividends but no long-term mine expansion/then I'd be in FMG.
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