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Dry bulk FFA market: Turkeys get stuffed but bulkers avoid the beaches

Dry bulk FFA market: Turkeys get stuffed but bulkers avoid the beaches
At the end of a year in which the markets were so poor that even the most committed traders have already called it a day, it was an unsurprisingly lacklustre last few days. Even the Turkeys have checked out and for those not back until January, the headache looks likely to continue.

Little was reported fixed this week and what was done appeared to have been concluded at mostly lower levels. It certainly felt like many traders had already left their desks with volumes thin and rates rangebound.Capes continued to trend down with sub $3 per tonne concluded for Western Australia/China and little news from the Atlantic.

Prompt was marked lower but the rest of the curve was largely unchanged and very little volume exchanged.A flat and rangebound market on Panamax paper too with similarly thin trading and little interest further out. Slightly firmer as the week progressed despite little further change but a better index Tuesday and some support at existing levels.Supras of course followed suit, with little trading taking place despite some tight markets and the tone drifting softer.

The seasonal break does give the market the chance to take a breather and consider what might be different next year. When it does so, it may quickly realise that the answer is "nothing much".

So bad are the markets that Deutsche Bank has argued that scrapping needs to surpass the historic highs of 1986 in order to ensure the correction is strong enough to support any chance of a freight rate recovery.

Spoiling the historical precedent of this analysis is the reduction in numbers of candidates for scrapping and the increasing likelihood that bulkers of 10-15 years will instead be laid-up next year. This is particularly likely in the panamax segment which is struggling to compete with new fuel-efficient kamsarmax and ultramax tonnage.

The implication of this is to reduce the opportunity for a sustained freight rate recovery given that laid-up vessels are able to re-join the fleet at short notice, squashing any short term pick up in rates and reducing freight rate volatility.

Unless and until that happens, let’s enjoy the break – best wishes for Christmas and New Year from Freight Investor Services.

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