Is history going to repeat itself as dry freight market plunges to a 4 month-low?

Not so many moons ago the Baltic Dry Index (BDI) found itself at the similar territory to where it is today with plunging rates as Lunar New Year approached. Then just days after the Lunar New Year, the BDI fell to lowest ever level at 290 points on ‘Black Wednesday’ of dry bulk shipping on 10 February 2016.

For now, the BDI reached 1,114 points on Thursday, 1 February 2018, down 38 points day-on-day, to almost a 5 months low. The decline was attributed to the lack of cargoes and market inactivity, the slump is likely to last for a while.

So will the freight market survive the ‘Lunar New Year curse' or rise up to the new challenge?   According to trade source, the capesize market is moving closer to the floor with just two weeks shy of Lunar New Year in mid-February 2018.

Moving toward the downward trend, few trade participants have the appetite to short the freight derivative market when there is underlying potential for the market to move up. Thus, there is a general consensus that the freight market would not see any big movement prior to the Lunar New Year, and only after the Spring festival then there will be uptick of activities.
“There is an ongoing lack of interest to sell capesize Q2 onwards on Wednesday, which is an encouraging sign that the negativity may not last long on capes before we see a physical revival before too long.” opined a FIS Freight Forward Agreement (FFA) broker.

True to his words, capesize paper headed a mini-rally on Thursday with marginally firmer rates on the market. During Thursday, there were signs of the C3 making a recovery with 15.00 and 15.30 fixed for early March laydays. However, the north Atlantic remained quiet and the C5 is stable, while the Cal 19 and Cal 20 got picked off by opportunistic buyers.
As such, the capesize 5 time charter average registered at $11,791 on Thursday, down $936 day-on-day, with the March contract was the top gainer at $14,825, up $345 at day-on-day basis.

The saving grace for BDI belonged to panamax that prevented the index from falling further through the week. Shipping activity for the grain market was especially robust throughout the week, providing supports to the South Atlantic market.

“Panamax paper added some small gains across the curve on Thursday,” said a FIS panamax shipbroker.

He noted that the Feb contract traded up to $11,200 while March and Q2 printed $12,550 and $12,900 highs respectively where some resistances become evident. Panamax time charter average that reached $11,046 on Thursday, down $263 day-on-day basis.

“Volumes were relatively light but most of the business concluded was higher on the day make for a more optimistic feel as the week draws to a close,” he concluded.

Supramax and handysize papers saw softening rates throughout the week. For supramax paper, March contract was trading $11,100 and the Q2 was paid $11,650 on Thursday, while supramax time charter average went down by $71 on-day to $9,893.

Finally, the handysize paper then saw little change on the curve with handysize time charter average at $8,047 on Thursday, down $95 day-on-day.

Posted 02 February 2018

© 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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