Dry bulk FFA market: Capesize rates shrink on thin activity

Capesize market remained quiet throughout the week with thin activities from the Asia-Pacific and Atlantic regions.

Despite muted activities, some trade sources observed that the market fundamentals are returning to a stabilized level slowly. They argued that there were good levels of weekly average of iron ore exports coming out of Brazil and Australia.

The good iron ore export volume is expected to support Capesize rate to a better level in near term. However, most trade participants remained cautious in waiting for clearer market direction.

Capesizes grounded

Throughout the week, Capesize paper market seemed to find itself in the barren desert, with limited market activity. Later in the week, the freight rates slid back to the $5,300 level on little volume, which was a level even lower than the Panamax rates.

By Thursday, the Capesize 5 time charter average posted at $5,290, down $286 day-on-day and dropped $457 as compared to the rate of $5,747 recorded on Monday. Throughout the week, most of the Capesize contracts ended the week in negative regions, only except for Cal 20 which ended in positive territory on Tuesday, due to push from spreads with Panamaxes.

Panamaxes still going strong

Panamax market booked gains throughout the week on positive momentum. This improvement in Panamax market was first thought as ‘contagious’ by some market participants as it might spread other market such as the beleaguered Capesize market.

They expected that the uptick from Panamax and Supramax market may encourage charterers and shippers to combine their cargo stems, which will lend support to the Capesize market.

Learn more about where the markets are headed at the Sea Asia 2019 Conference in Singapore 

This was a wishful thinking as the strong Panamax failed to rally the weakening Capeszie market in the week. Nevertheless, the Panamax paper market aced another impressive week, with the Panamax time charter average posted $6,548 on Thursday, up $493 day-on-day and up $1,030 from Monday’s rate of $5,518.

Super Supramaxes

Strong pushes were seen in the Supramax paper market earlier in the week, before momentum slowed down as the week drawn to a close. The optimism in Supramax may be built around the easing of trade tension between the US and China as China pledges to purchase a further 10 million mt of soybeans from the US as part of the trade deal.

However, the failed summit between Trump and Kim in Hanoi this week may add some ‘element of uncertainty’ between the US and China trade agreement with doubts on whether trade deals will be carried out in earnest.

Besides, there is a scarcity in the US Gulf grains front-haul cargoes for 2019 that threatened to mirror Atlantic Supramax market’s worst collapse in rates since 2016. Some trade sources pointed out that only a handful of grains came out of the US Gulf, and consequently there have been very few front-haul cargoes suitable for Supramaxes.

With few physical grains support, some market participants expect a depressing first quarters of 2019 for the shipowners. Nevertheless, Supramax time charter average gained $114 day-on-day to $8,329 on Thursday, while Handysize time charter average hiked up by $103 day-on-day to $5,646 on Thursday.

Posted 01 March 2019

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Contributed by Titus Zheng, Freight Investor Services (FIS)

Contributed by Titus Zheng, Freight Investor Services (FIS)

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