Dry bulk FFA market: BDI rules the waves

It is another shining chapter for the Baltic Dry Index (BDI) as the rates roared higher into record-breaking zone. On Wednesday, the BDI powered to 1,449 points, the highest level in the year and up 34 points at day-on-day basis.

At the moment, there seem no stopping for uptrend as the indicator may soar higher in the near term. According to Wall Street Journal, the BDI is predicted to go bullish on the short-term, testing 1,700 points as expected initial resistance level.

Other has attributed the rising BDI rates to the upturn to the strong global economy with increased shipment of commodities such as grains, aluminum, coals and iron ores. On the hype of market optimism, one shipping trade source even speculated that capesize rates might reach $25,000-$30,000 per day over the next two to three weeks.

“News filtered into the market of stronger fixtures ex Brazil and consequently the Sept traded up to $20,250, October to $20,300 and the Q4 up to $18,750 on Monday,” said a FIS FFA broker.

Later on Wednesday, the capesize 5 Time Charter Average finished at $20,694, gaining $897 day-on-day and up 5.7% from the rates of $19,578 recorded on Monday. As the week goes by, Capesize rates may climb even higher in reaching new height.

“The talk of C3 fixing 18.85 and Saldanha reaching low 14s for 11-15 Oct dates should keep buyers keen as the week progresses,” opined one FIS Capesize broker.

However, some risks are identified as the Chinese mills seem to slow its import of seaborne iron ore after a series of sintering output cut imposed by Chinese authority on mills in Tangshan and Hebei, the steelmaking hub of China.

Furthermore, most of the Chinese mills were heard to have sufficient inventory at the moment and are unwilling to procure seaborne cargoes. Thus, the demand of iron ore fines has lowered among the Chinese end-users, while the demand of lump remained high as mills use the materials to comply with state imposed environmental restrictions.

Meanwhile, the Panamax market was off to a slow start this week with static rates seen so far. The Panamax time charter average recorded $12,310 on Wednesday, up $24 from Monday’s rate of $12,286.

“We saw another static day for panamax paper on Wednesday, with the physical market starting to develop into a bit of a standoff and as a result further uncertainty creeping into the market,” opined a FIS Panamax broker.

This mixed movement was shared by supramax which did not enjoy the big gains seen in capesize but have a modest run throughout the week. By Wednesday, supramax time charter average reached $10,556 up 1.9% from Monday’s $10,358.

“Although the larger sizes were seen pushing early on supramax paper at Wednesday, the paper market remained reluctant to follow suit as we still lacked bid support.” said an Asian-based FIS FFA broker.

Thus on Wednesday, the October contracts were down to trading at $11,350 and the Q4 at $11,400-$11,300 range. In the meantime, handysize time charter average closed at $8,496 on Wednesday, up 4.4% from Monday’s $8,131.

Overall, the shipping rates are off to great start in the seasonal peak period but risks remained as buying appetite of iron ore runs dry among Chinese mills due to stricter environmental regulations. Despite the risks, the market optimism is high as BDI goes down the road of record-breaking gains.

Posted 21 September 2017

© Copyright 2019 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)

Seatrade Offshore Marine Workboats stacked

Seatrade Offshore Marine and Workboats Middle East

Madinat Jumeirah, Dubai • 23 – 24 September 2019

Join nearly 3,000 powerful personalities and alight at the meeting point for the global offshore marine, specialist vessel and workboat industry.

Exhibitor Opportunities >