Spot freight rates for Capesize dry bulkers surged Aug. 3 and shipping analysts note that the fundamentals of the sector were not as bad as the freight market had indicated in 1H15.

Capesize rates rose 9% Aug. 3 and stand now at US$17,162/day. The BDI (Baltic Dry Index) has now risen by 95% to 1151 from 589 at end of May, mainly driven by the Capesize segment. Cape spot rates are up by 301% in the same period, said DNB Markets' shipping analysts Niciolay Dyvik, Oyvind Berle, and Petter Haugen.

"We believe the improvement is driven by increasing Atlantic iron ore volumes (Vale reported an all-time-high 2Q15 production recently), also helped by low Chinese inventories (down 18% YTD, 26% YOY)," the analysts said.

"In our opinion the dry bulk segment was never oversupplied to the extent one should believe by looking at the spot rates (1H15 Capesize rates averaged USD4,591/day)," they pointed out.

A decline in Chinese coal imports has been blamed for the recent prolonged weakness, but as the 90 million tonnes of annual decline in Chinese coal trade equals only to a 2% loss of demand," they noted.

Rising coal imports to India combined with high pace of demolition sales that have removed 20 million dwt, or 2.6% of the dry bulk fleet being scrapped so far this year, have helped the market, they said.