A late Valentine’s sweetheart for dry bulk freight

There were few Valentine’s Day surprises for the freight market this week, as the market has reverted to its seasonal mode of slowing seaborne trade.

So it was mostly a case of “same old, same old” as the post-Lunar New Year bounce back failed to make a significant impact on the freight rates. Instead, the market appeared to be brought to an abrupt halt compared to the momentum that appeared to be picking up at the start of the year.  

Iron ore prices have benefited from the slowdown in freight rates especially from the lower capesize levels and rebounded to over $90 per mt on Monday, marking a three year high in the commodity pricing.

The dip in capesize rates was attributed to the lack of ships for fixing off Western Australia due to the port closures last week because of bad weather. Across the Atlantic basin, capesize activity was lukewarm too and the market lacked clarity of direction. Fundamentally, the market was suffering from the phenomenon known as age-old case of “too many ships and not enough cargo” at the moment.

As a result of the tepid demand, capesize time charter average rates hovered around $4,630-$4,808 for most of the week, while panamax rates traded in the range of $7,478-$7,563. Meanwhile the Baltic Dry Index also exhibited lack of clear direction and yo-yo’d back to 688 points by Wednesday.

With few better prospects in sight, traders eyes are turned toward the Q2 market and further ahead where better demand for raw materials and higher construction activities are slated to grow.

“There are divided opinions on whether Q2 will give this market a much-needed recovery,” said a FIS freight forward agreement broker. He added that Q3 offered more stability and was well bid with limited selling interest at the moment.

So it looked like this would not be a love-struck week for freight but by Thursday the cape market was pushing higher from the London open as the traders felt that the physical market had bottomed in both basins.

It appeared the Atlantic was the stronger and the round voyage led the way with notable gains from charterers’ levels. March capes traded up to $7,500 and Q2 a tick above $9k before losing some liquidity in the afternoon but there was a feeling like there could be further gains to come.

Thursday was a static rangebound day again on panamax paper with little change in rates as the firmer cape market seemed offset another dent in the index. Despite the static nature of the market, some healthy volume changed hands with March continuing to trade $7,900-7,950 range while Q2 saw support tested at $8,500.

Posted 17 February 2017

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Contributed by Titus Zheng, FIS Singapore

Contributed by Titus Zheng, FIS Singapore

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