Dry bulk FFA market: Happy New Year, or maybe not

On Thursday the Baltic Dry Index fell almost five per cent – or 22 points – to plumb a new all-time low of 445 points. This meant that of the four days that it has been published in 2016, the index has been at a record low for three of those days.

The collapse of China’s equity markets as well as continued declines on oil and iron ore hardly helped confidence. Neither did headlines which evoked Darwinian levels of natural selection among owners in the year to come.

Strange days indeed then, when the capesize paper market started with what amounted to a little enthusiasm and talk of West Australia/China being bid at $3.30. But the market struggled to gain much traction and sellers quickly returned. There were even some modest gains but few felt they would carry much weight this week, leaving the market at the lows on prompt periods whilst the rest of the curve was more stable.

By week’s end even that optimism had waned with the 4TC index slashed by 16% and the curve trending lower. Volumes were good with the Jan 2016 through to Cal 17 contracts trading in decent size albeit at very low levels.

Panamaxes are the bearers of all bad news this year and saw little by way of New Year cheer. Paper continued to drift lower across the curve in both basins, with the index in negative territory and sellers stepping up. January and February traded down and both Q2 and Cal16 broke $5,000 support.

The week’s gradual decline quickened on Thursday with the curve under pressure. Q1 is low enough to be attracting renewed support but the longer dated contracts were also sharply sold off.

Supramaxes naturally felt about the same amount of pressure with further steep falls in rates with the quarters alone and in strips taking a collective hammering. This segment is still searching for support levels but the general decline is proving hard to resist.

Further falls by week’s end with the market pushed down from the start with continued pressure from the offer side breaking through any remaining bids. The prompt saw some activity but it was the back end that really felt the strain with Cal 18 gapping down.

Contact FIS: http://freightinvestorservices.com/freight-derivatives/ffas/

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