That the upwards move and subsequent rise coincided with the result of the US election last week has resulted in seen the market hike upwards on speculation and second guessing on what the new US administration will mean for the market.
On Wednesday the BDI reached 1,145 points, up 61 points day-on-day, recording a 9th straight day of gains since 2 November, from a base of 834 points. The recent rise was in stark contrast to the 290 points – the historical lowest level - recorded on 10 February 2016.
Perhaps the freight market scents an opportunity from Trump’s election victory speech which touted a proposal for a USD1trn infrastructure stimulus plan over a ten-year period.
News of the stimulus plan soon caught up with commodities such as iron ore that created a ‘Trump Jump’ towards the USD80/mt level. Dry bulk freight market then piggybacked on the iron ore price spike and hovered above the 1,000 points level throughout the week.
Riding on this wave of success, the spot capesize timecharter rate saw its biggest gain on Wednesday, with an increase of 1,260 before closing at 17,656 by the end of the trading day.
“The bearish sellers from Tuesday returned to the market today to close positions and this coupled with the renewed optimism from the physical lifted the market,” explained one FIS freight broker.
Along with the capesizes, the spot panamax rate also made its best gain on Wednesday, with a rise of 803 before ending at 10,075 on paper. Spot supramax rates too proved to be instrumental in lifting the overall BDI index, and climbed by 91 to 7,548 on 16 November 2016.
It is still too early to attribute a dry bulk recovery based on one man’s speech to his supporters. In fact, the recovery has been slowly molded behind the scenes, with market fundamentals clicking into action. For instance, developing countries including South Korea, Taiwan and Vietnam are importing more coal to fuel their newly opened coal-powered energy plants, while China has increased its imports of iron ore from Brazil, boosting tonne-miles.
On the road of recovery, the momentum may be slow but surely and steadily, the market is inching upwards away from the abyss.
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