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Dry bulk FFA market: The Chinese are coming (back)

Dry bulk FFA market: The Chinese are coming (back)
After a week-long break, the Chinese participants swapped their baijiu for business suits and ties and came back to the trading floors and with their return brought the prospect of a post-Golden week market uptick.

Fired by the Chinese resurgence, market got off to a punchy start before hitting the brakes as Baltic Dry Index (BDI) hovered just above the 900 points level at 906 points on Wednesday, down 16 points as compared to Tuesday.

This “losing-steam” scenario was then played repeatedly in the FFA markets.  First, paper got off to a slow start with around 775 lots exchanged hands on 10 October, Monday, which was a stark contrast to last Friday’s volume of nearly 2,000 lots traded.

Then, the trading volume went ballistic to hit 3,170 lots on Tuesday before winding down to 2,260 lots on Wednesday.  This peak–trough cycle reflected the kind of impact that the Chinese participants held in the market; first beginning with a flurry of activity before settling down to a more realistic level.

As such, the capesize spot charter rate declined steadily at the start of the week with gradual losses from $14,013 on Monday down to $13,140 recorded on Wednesday, losing over $873 in just three days.

On the contrary, panamax spot rates had defied gravity and booked steady gains from $5,839 on Monday to reach $6,114 by mid-week trading. Trade sources indicated that there are more enquiries coming from Indonesia and Australia especially on coal shipments that inevitably drove up the rates. Meanwhile, gains are also seen in kamsarmax where rates were heard at $7,000 daily for rounds.

On the other hand, supramax and handysize rates did not catch on to the Chinese uptick, and remained statics throughout the week. For instance, supramax spot rates started the week lethargically at $7,076, then ended $7,048 by Wednesday, a change of just $28. However, the supramaxes lethargy may wear off with positive development in near term.

“Supramax paper like the larger vessels was subject to some positive momentum as we saw rates increase throughout the day,” said an FIS freight broker based in Asia.

He believed that the prompt has started to push with physical reports of better fixtures and a seemingly tightening Atlantic market.

Handysize spot rates however seem immune to the post-Golden week uptick with spot trading relatively unchanged at the range of $5,912 - $5,935.  

So it is “business as usual” for Chinese traders, as they found their way back to the markets this week. On their return, they brought along some short-lived vitality, like a Sichuan hot pot: hot and spicy on the first taste before the numbness set in.

Contact FIS: http://freightinvestorservices.com/freight-derivatives/ffas/