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Dry bulk FFA market: The great Lunar New Year slumber

Dry bulk FFA market: The great Lunar New Year slumber
It was never going to be a vintage week and as expected, the dry freight market remained quiet throughout as Chinese participants – and plenty of European ones too - took off to celebrate the Lunar New Year holidays.

As a result of the inactivity, freight rates lost big chunks of the gains made in pre-Lunar New Year trading and fell into an uneventful seasonal January lull.

This market lullaby caused the Baltic Dry Index (BDI) to venture into sub-800 point territory to 786 points on Wednesday, after shedding 14 points on a day-on-day basis. That is almost the similar level last seen in September 2016, where the BDI languished between 700-800 points for most of the time.

An Asia-based FIS broker waxed lyrical, if predictable. “Shipping is a funny old game. The physical market continues to slip in both oceans although the rate of decline has slowed,” he commented gnomically.

During this period of thin trading, brokers felt that demand for Atlantic tonnage would lend some stability to the market in the absence of Chinese traders.  After all, the freight market is reliably seasonal in nature, like a ship’s engine that needs to warm-up in the first quarter of the year before going full speed ahead toward the fourth quarter.

Throughout this week, spot capesize time charter rates have lost over $394 in value to $8,318 in the span of three days to Wednesday. Despite this, mid-week saw capes continue firmer post-index and well bid into the close, trading at the highs of the day. 

Spot panamax rates resumed their gradual slide to $7,456 on Wednesday after starting the week at a level of $7,699, with losses of $243 offset slightly by the support of stronger grains trade and remained fairly well supported.

Amid the market’s lethargy, spot rates for supramax and handysize vessels also struggled to find support and stumbled to a gradual slide. By Wednesday, supramax rates had dropped over $146 to $7,047, while handysize rates had dipped by $298 to $5,685.

Whether the freight market will rebound once the Chinese participants are back this Friday after the long holidays is anyone’s guess. By Thursday capes were trading lower nearby and taking the rest of curve with it while panamaxes were firmer despite the cape weakness with good buying across curve.

Last year’s omens are not good – the market took a nosedive post New Year. But a repeat seems less likely – most industry experts agree that the dry market is heading toward better times this year, even though the recovery is likely to be fragile.

Either way, FIS would like to wish its clients and friends Gong Xi Fa Choi and let’s hope the market will hear more ‘Gan bei’ (Cheers!) once the Chinese are back to business.