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Dry bulk FFA market: Happy days are here again

The freight market seems rosy this week with the Baltic Dry Index (BDI) surging toward a multi-year high.

As of Wednesday, 1 August 2018, the BDI reached 1,760 points, just short of one-year high reading of 1,774 recorded on 24 July 2018.

The rally appeared unaffected by the looming trade war between US and China, as the US President, Trump threatened to escalate the tension by slapping a tariff of 25% on $200bn Chinese imports instead of previous 10% tariff.

Nevertheless, the rally was backed by good fundamentals from the Capesize market with strong demand presented at key iron ore shipping routes.

For instance, Brazil was pushing for record Capesize shipments via the Tubarao to Qingdao route, to make up for the shortfall experienced in the rainy first quarter of 2018. Moreover, tonnage demand from South Africa also lend support to the Capesize market.

On this backdrop, the Capesize paper market enjoyed a solid start to week until some retracing in the mid-week, due to some profit taking from the market participants.

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“It is a solid start to the month of August for the physical market as Vale were linked with taking anywhere between 5 and 8 ships for C3, though rates were suggested to be around the $24.00/mt level,” commented a FIS shipbroker on the Wednesday market.

However, later in the day, he observed some signs of the physical market coming under pressure due to the threat of potential typhoon closing in to China’s eastern coastal areas, which might cause shipping delays, port closure and disruption of communications.

As such, the Capesize 5 time charter average closed Wednesday at $26,204, up $506 day-on-day and up $1,708 from Monday’s rate at $24,496.

On the contrary, Panamax opened the week sluggishly and saw the rates came under pressure with time charter average at $12,307 on Wednesday, down $248 day-on-day.

“As the optimism of trade war re-negotiations wore off and coupled with further declines in both basins, we quickly saw sellers return giving back most of Tuesday’s afternoons gains on Panamax paper on Wednesday.” explained a FIS Freight Forward Agreement (FFA) broker.

Overshadowed by the sold down of the big vessels, the Supramax paper market witnessed a quiet week due to lack of activities.

On Wednesday, the prompt took the main hit with August contract trading down to $11,250 early on before finding some support there. Little change was seen on the backend with the Cal19 printing $12,000 and Cal21 at $10,150.

Thus, the Supramax time charter average came to a spot rate of $11,118 on Wednesday, up $4 day-on-day, while the Handysize time charter average posted at $8,017, down $31 day-on-day.

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