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Dry bulk FFA market: Up, down and sideways, but not much further forward

Dry bulk FFA market: Up, down and sideways, but not much further forward
The paper freight market continues to defy logic and to some extent the gravity of the challenges of the physical market. Though the Baltic Dry Index posted only a modest Thursday - Thursday gain, the capesize 4TC average rose 24%, the 5TCs by 16%, though panamax was flatter and supramaxes negative.

Capes looked to have cooled off with lower volume trading early in the week but physical continued to push ahead in both basins with both indices marked up early in the week. Paper took the quiet tone as a bearish sign with futures easing and the front month briefly trading below spot.

A rattle in the physical market saw paper come off midweek, but buyers returned, pushing rates off the lows. Another turnaround on Thursday as paper pushed from the open on talk of stronger physical. The indices made modest gains, but rumours of Western Australia/China fixing $6.10 and Tubarao/Qingdao at $14.00 fuelled the enthusiasm as the afternoon session continued, leaving the balance of the year at a sizeable premium to spot.

Panamax traders looked at the likely strength of the Atlantic market in the light of cape nerves and blinked. Rates came under pressure with sellers probing in small clips as the Atlantic tone turned into a stand-off and a lethargic Pacific market drained the activity away. Fresh support was evident later, with sellers scaling back.   

By week’s end holidays began to take their toll and we saw little deviation in rates with the positive Cape sentiment being offset by the sluggish physical market and another drop in the index. Support remains around $7,000 on October, $7,500 on Q4 with current premiums seemingly sufficient.

Supramaxes were seemingly unable to generate much by way of excitement with rates slipping early in the week as the larger sizes came under pressure. Physical reports suggest a similar stand-off with Middle East and Asian holidays approaching.

Both the front and back ends were weaker but flatter thereafter, with rates supported at current levels, October, Q4 and Cal 16 seeing the bulk of the activity. Thursday’s index was down again but the rate of decline is slowing towards a flatter picture.

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

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