Dry bulk FFA market: November ends with a bang

It was a roaring month with freight rates hitting higher notes and saw the Baltic Dry Index (BDI) reaching a new high. By Wednesday, the BDI climbed to 1,536 points, up 30 or 1.99% day-on-day, inching toward the peak of 1,588 recorded in the late October.

The BDI rally may trace its root to the solid capesize market with healthy level of fixtures over the Pacific market. As it was also heard that some sizeable volume of cargoes were vying for tonnage on the west coast of Australia to China route. However, there seen to be a tonnage deficit for December loading fixture over at the Atlantic market.

Nevertheless, the week still went rosy for the capesizes market with capesize 5 time charter average at $24,193, up $597 day-on-day at Wednesday, 29 November 2017.
“New highs were posted again on the indices and paper on Wednesday,” said a FIS FFA broker.

He noted that the headline fixtures like C3 at $20 and C5 at $9.60 kept rates pushing late into the afternoon session on Wednesday and at this rate, there might be plenty of rooms for the discount from spot to catch up before the weekend.

So far, the capesize market had been benefiting from the robust steel market in China, with high margins for steel-making, then the mills have greater appetite for the seaborne iron ores. The price rally was reflected in the paper market as well which saw Shanghai rebar hiked to a seven week high, supported by supply tightness. According to SteelHome consultancy, the rebar inventories in China were held in the lowest level in six years, or 3.35 million tonnes as of 24 November 2017, the lowest level since 2011.

Then on the paper market, the most actively traded May 2018 contract in Shanghai climbed by 2.6% to RMB 3,957 on Wednesday. At one time, the SHFE rebar even shot up to RMB 3,966, the highest level since mid-September.

Likewise, it was a positive week for the panamax market, with the panamax time charter average recorded at $10,962 on Wednesday, up $382 day-on-day.
“We opened well bid from the start of Wednesday morning on panamax paper with buyers willing to bid the previous day highs.” commented a FIS shipbroker.

Despite the good start, some initial resistance were seen with the Dec and Jan contracts pushed up to $12,250 and $11,100 highs respectively, thus maintaining a decent carry as both basins continue to gather momentum.

“With capesizes seeing a late surge, we saw sellers thin out as buyers looked to repeat last done at the close for the Panamax market,” he added. This growing freight inertia were seen in supramax market as well which witnessed the Calender 18 finally broke the $10,000 resistance barrier on Wednesday, before it was being offered back over. At such, the supramax time charter reached $10,427 on Wednesday, up $54 day-on-day, while the Dec was trading at $10,900-$11,000, and Q1 throughout the day at $9,750. For handysize, some modest gains were recorded on mid-week at $9,089, up $27 day-on-day.

Overall, the steel output restriction in China over the winter helps to support good steel-making margins, giving much cash-flow to mills to strategise their next move over the New Year. Then, the rally in steel futures have pulled iron ore and coking coal prices higher that benefited freight rates as well.

Posted 01 December 2017

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Contributed by Titus Zheng, Freight Investor Services (FIS)

Contributed by Titus Zheng, Freight Investor Services (FIS)

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