Dry bulk FFA: Freight market turns the corner

The Baltic Dry index (BDI) seemed to walk out of its shadow and posted an uptick this week, with improvement seen in the Capesize market as well as support drawn from the consistent-performed Panamax market.

Overall, the BDI achieved 993 points on Thursday, 12 April, up 14 points at day-on-day basis, showing good momentum from larger vessels. According to a trade source, the market sentiment for Capesize in the Pacific had improved with a healthy number of fixtures and stronger rates seen.

The firmer rates in Capesize were justified from stronger paper market with Capesize 5 time charter average posted at $8,362 on Thursday, up $267 day-on-day, and up $1,010 from Monday’s Capesize rate.  

“Sentiment swung again on Capesize driving up the paper prices sharply on the run up to index on Thursday,” said a FIS forward freight agreement (FFA) shipbroker.

However, he noticed that the modest gains were not enough however to stop the surge on paper on Thursday which saw Apr traded up to $9,900, then May traded up to $14,000 and Q3 contracts rose to $17,500 before the market called it a day.

“Talk of better C5 fixtures and increased enquiry in the Atlantic seemed to be fueling the buying appetite. Although many traders felt the drive in the physical was lacking which seemed to be the case when the index materialized.” he concluded.

Then, the ever-consistent Panamax paper market supported the rally as well before becoming rangebound toward the end of the week. By Thursday, the Panamax time charter average had reached $10,722, up $82 day-on-day and up $163 as compared to Monday rate of $10,559.

On the contrary, the Panamax market showed a bit of a slowdown and reversal in paper trading on Wednesday despite the good start in the week.

“The recent post Ching Ming holidays uptick in activity of both basins failed to generate firmer numbers on Wednesday, as we saw another cautious day of trading on the Panamax paper.” commented a FIS Panamax shipbroker.

Later, the paper market recovered with the April contract traded back up to $11,375 on Thursday, while the Q3 and Q4 had pushed back to $12,700 and $13,350 highs respectively. Cal19 contracts saw some small gains too at $11,750 to imply an optimistic market sentiment ahead.

Smaller vessels, however, were on the decline as compared to their larger counterparts. Supramax paper market was on the slide and saw its time charter average at $10,671, down $19 at day-on-day basis and down $175 since Monday.  

Despite the Supramax paper market opened at the stronger note on Tuesday, but the afternoon trading session had brought the run to a halt. Similarly, robust drive was seen in the opening of Wednesday paper trading day, where rates ticked throughout the day but failed to rally and bottomed to a negative index with Apr and May contracts dropping $75 and $175 to $11,225 and $11,725 respectively.

Handysize paper market then had a relatively quiet trading week with the time charter average recorded at $9,263 on Thursday, down $59 at day-on-day basis.

Posted 13 April 2018

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Contributed by Titus Zheng, Freight Investor Services (FIS)

Contributed by Titus Zheng, Freight Investor Services (FIS)

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