Dry bulk FFA market: Capesizes are coming home

The capesize market has surpassed expectations amid the World Cup lull, posting higher rates as activities picked up across all the Asia-Pacific routes.

Just like the England fans chanting “It’s coming home, Football's coming home”, after England squad progressed to the World Cup quarter-final, the capesize market is “coming home” too with paper freight rates reaching the $20,000 level again on this week.

The “home coming” of capesize rates has raised some eyebrows among the market participants as the paper market had seen a slowdown recently due to the continued disparity between the Asia-Pacific and Atlantic markets. However, this trend was soon reversed as the week progressed.

“The physical market came into life on Tuesday with all the Australian miners being active in the market,” said a FIS shipbroker.

Therefore, the prompt paper market soon gapped up and signaled that the market might move higher over the short term if this prompt physical squeeze continues its upward momentum.

“As the world cup heats up the capeszie market continues to do the same, as both the Pacific and Atlantic posted considerable gains on Wednesday with some headline fixtures,” commented a FIS shipbroker.

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As such, the index capesize paper witnessed a jump of 11% into some selling post index and later rates improved as the Wednesday afternoon drew to a close. Capesize 5 time charter then posted at $22,847 on Wednesday, after a gain of $2,332 at day-on-day basis.

But it was a different story for the panamax market, where the paper market came under pressure and the overall trading tone remained cautious through the week.

“After a range bound opening on panamax paper, we eventually saw the early support spill over into some firmer buying post index as the improved sentiment bolstered optimism on Wednesday,” said a FIS Freight Forward Agreement (FFA) broker.

Despite the optimism, the panamax time charter average still booked a loss of $18 to spot rate of $10,714 on Wednesday.

Similarly, the supramax market mirrored the downward slide in panamax rates and opened at a flat note by midweek with the time charter average printed $10,752 on Wednesday, down $78 day-on-day. The July contract came under constant pressure throughout the week and recorded at $10,950 on Wednesday after booking a loss of $125 at day-on-day basis.

The Handysize market then had a quiet trading week with the time charter average booked at $8,313, suffering a loss of $38 at day-on-day basis.

Posted 05 July 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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