Dry bulk FFA market: The Long road to recovery

After being depressed for a long time, the recovery for dry bulk freight rates appears not to be wishful thinking anymore.

The sign of a freight recovery are being shown in the Baltic Dry Index (BDI) which hovered steadily at the 1,000 mark by the end of April after bouncing off from the low of 600 since February.

This market sentiment improvement soon rubbed off from the physical and paper market, only to be paused by long holidays period this week.

Capesize spot market unfazed by poor China’s PMI

China’s Caxin PMI rating recorded at 50.2 in April, failing analysts’ estimate of 51 and raised market concerns over a slowdown in the Chinese economy growth.

However, the Capesize market did not have market blues as bullish sentiment overshadowed the bears with virtually no effect in its spot market.

Nor did the closures of the Chinese and Japanese markets for the long holidays affect the spot market during the week. The market appeared to be buoyed by the strong performance in the paper market that further drove away doubters.

Bullish Tuesday

Just before the Labour day holiday break on Wednesday, the Capesize paper market was the most bullish, with the time charter average booked a daily gain of $2,515 to $11,718 on Tuesday, 30 April 2019.

The positive momentum then carried on over to Wednesday, which appeared that the physical market finally caught up with the FFAs, just being paused by the holidays break.

Shipowners had to wait out the holidays period to fix vessels, but the overall market mood remained optimistic, with paper trading still at a premium. As such, the Capesize 5 time charter average finished at $12,346 on Thursday, 2 May 2019, up $3,143 since Monday.

Panamaxes take cue from Capesizes

It was a fairly range bound week for Panamax paper market with various holidays in the short week of trading.

Most of time, Panamax paper market took its cue from the firmer Capesize market and managed to pull back from some previous weeks closing losses.

Later in the week, the paper market found a floor and saw an increase of activities in both basins with May and June contracts traded up to $9,600 and $9,750 respectively.

Thus, the Panamax time charter average was posted at $9,516 on Thursday, up $17 day-on-day and up $3 since Monday’s rate at $9,513.

Subdued trading for smaller vessels

The market optimism of Capesizes failed to catch up with the smaller vessels as Supramaxes had a quiet week with limited rangebound trading due to the holidays.

On Thursday, 2 May 2019, the Supramax paper market was supported by a flurry of buying that prompted the May and June contracts to trade at a high of $9,150 and $9,600 respectively.

However, the index soon drifted back into the negative territories as the Supramax time charter average posted $8,431 on Thursday, down $76 day-on-day and down $233 since Monday.

Handysize paper had a quiet week with time charter average booked a daily loss of $29 to $5,751 on Thursday, down $43 since Monday.

Posted 03 May 2019

© Copyright 2019 Seatrade (UBM (UK) Ltd). Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade.

Contributed by Titus Zheng, Freight Investor Services (FIS)

Contributed by Titus Zheng, Freight Investor Services (FIS)

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