Dry bulk FFA: Capesize market goes into full throttle

The Capesize rate has breached over the $20,000 level on Wednesday, supported by the bullish steel demand in China. Initially, the rally in Capesize rates started early in the week, making the biggest gains for front months on Tuesday, 8 May 2018.

According to a FIS Freight Forward Agreement (FFA) broker, the May contract had traded during Monday Bank holiday at $18,000 and was trading $18,750 levels by 7.30am on Tuesday. Later into the day, some volumes were traded from this level to $19,200 where it found resistance.

“The index is expected to continue higher tomorrow (Wednesday) and may breach the $20,000 level,” predicted a FIS FFA broker. 

True enough, some fresh buying interests were found and pushed the May contracts and other contracts such as June contracts to higher rates on Wednesday.

“Capesize paper pushed again in early trading and, sticking to curry analogies, reached vindaloo status once again on the run up to index,” said the FFA broker. 

Thus, Capesize rate managed to break the psychological barrier of $20,000 by Wednesday, with the Capesize 5 time charter average printed at $20,469 and registered a gain of $901 day-on-day. June contracts had a similar rally and broke the $18,000 mark at average around $18,125 level on Wednesday.

Despites the gains, Capesize Q3, Q4 contracts were registered in red with Q4 contracts became the biggest loser with a drop of $300 to $21,875 on Wednesday. 

The Capesize rally was in tandem to the high iron ore demand that gotten a lift from the dwindling steel inventories in China. Overall, the market sentiment for steel demand in China remained bullish for the second quarter due to the seasonal construction activity peak after winter output cuts. The good steel margins also encouraged mills to produce more with higher operating rates.



newsletter

Some of these Capes rally got rubbed off to the Panamax market as well, as some small gain were made on Wednesday. During the early trading session, the Panamax saw a flurry of buying pushing May and June contracts back up to an average of $200 while Q3 and Q4 printed $12,450 and $13,300 highs respectively.

However, the early rally soon lost steam and drifted off a touch but continued to see good support just under the day highs. As such, the Panamax time charter average recorded at $10,089 on Wednesday, down by $27 day-on-day basis.

The Supramax market had a rather lethargic week, affected by the full flow of European holidays. By Thursday, 10 May 2018, the May contract was trading at $11,000 and the Q3 traded at the range of $11,850-$11,750.

The Supramax index then stepped back into positive territory on Thursday with time charter average registered at $11,033, up slightly by $8 as compared to a loss of $100 seen on Wednesday.

Similarly, the Handysize market had a very quiet week with little changes in the curve and the time charter average registered at $8,527 on Thursday, down $3 day-on-day.

Posted 11 May 2018

© Copyright 2018 Seatrade (UBM (UK) Ltd). Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade.

Contributed by Titus Zheng, Freight Investor Services (FIS)

Contributed by Titus Zheng, Freight Investor Services (FIS)

Maritime Awards