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Dry bulk FFA market: Capesize gives way to selling pressures

Dry bulk FFA market: Capesize gives way to selling pressures
Capesize paper rates were pushed to a week-low on Wednesday despite a steady start but finally gave way to selling pressure. As such, January capesize paper saw numerous trades at $18,500 level before slipping to $16,875, down $2,200 day-on-day.

A trade source interpreted the slip off as a temporary one as market took a breather after days of rallying rates that saw the freight rates climbed to an almost three-year high.

“The index is clearly on the decline on Wednesday and paper is pricing in a substantial drop as we approach the end of the year,” said a FIS FFA broker.

He noted that the capesize 5 time charter average slid to $29,637 on 13 Dec 2017, down $838 day-on-day, while the December capesize contract retreated by $775 day-on-day to $27,875.

“But the big question is how quickly we will see a retracement of more the $10,000 off the index before the year is up.” he added.

The slip-up in paper trade may suggest lower freight rates next week and on a longer term basis expected a decline of freight rates in early 2018. Moreover, the lack of activities among the key shipping route on Tubarao-to-Qingdao casted further market uncertainty ahead.

However, there was some market supports for firmer rates toward Christmas and early 2018, stemming from port congestions in China and tight tonnage supply situation seen in the Atlantic. Due to the tight supply, a trade source suggested that most ship-owners are holding back to certain extent.

Panamax paper rates too succumbed to the selling pressures of Capesize and went into the negative regions after a positive start on the week.

“Some toppy talk had spooked sellers making for a jumpy days trading on Wednesday, particularly on that back of another good index,” remarked a FIS Panamax ship broker.

By the close of 13 Dec 2017, the December contract had slipped to $13,200 however it was January which seemed the most volatile trading down from $12,100 to $11,700 with good volume changing hands. Further out levels remained fairly well supported with losses less severe.

Both January contract and Q2 contract became the top losers on Wednesday with a loss of $300 day-on-day at papers market. Panamax 5 time charter average then traded at $13,740, down $362 on Wednesday.

Meanwhile, the supramax paper went into the red at the start of the week, with time charter average at $10,533 on Monday, down $12 day-on-day. Later, the supramax time charter average recovered to $10,542 on Wednesday, seeing a small gain of $9 over the week.

“Supramax paper came under some pressure early on Wednesday before finding a level post index taking their queue from the larger sizes as the index continues to flat line,” comment a FIS supramax shipbroker.

In the meantime, it was a quiet week for handysize with time charter average hovered at $9,242 by mid-week, down slightly by $4 day-on-day. Overall, the Baltic Dry Index (BDI) recorded 1,730 points on Wednesday, down 13 points or 0.75%.