Freight market has gone mental

Dry bulk rates have doubled, halved and doubled again to hit new highs - all in just 12 months - as Asia's demand for iron ore and coal continues to take shipowners on a rollercoaster ride, Michelle Wiese Bockmann of Lloyd's List reports.

The first signs of May's record-breaking rally in dry bulk rates emerged six weeks ago in London, when a routine chartering deal swiftly escalated into a frenzied bidding war.

On April 21, brokers at London-based Clarksons went to fix a capesize vessel to carry iron ore from Brazil to European steel mills.

The vessel's owner initially agreed the going daily rate, a healthy $140,000. But there appeared to be few other ships available and the owner changed his mind. Twice. Within 24 hours, the vessel had fixed and failed three times. The deal closed at $192,500, a staggering 25% more than the first price.

"I've never seen a jump like that in one day," said a veteran broker on the trading desk. "Then we all started thinking: 'Oh my god, where are all the ships?' It was only then everybody started realising that nobody was hiding them; there just weren't any available."

The market took several days to digest the tonnage shortage among the fleet of 750 capesize vessels ndash; and then rates began to rocket.

Capesize charters for ships trading in the Atlantic swiftly rose and by early May had broken $200,000 per day and continued to head north.

The rest, as they say, is history.

"It's not a question of: 'I'll have this ship, or that ship'. It's: 'where's a bloody ship?'," said Nick Collins, a director at Clarksons. "Shipowners can name their price."

These "astounding" prices reflected "the mother and the father of all [shipping] cycles", he said.