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Dry bulk FFA market: BDI scores a big breakthrough

Dry bulk FFA market: BDI scores a big breakthrough
The Baltic Dry Index (BDI) has reached a 34-months high at 1,355 on Monday before suffering slight drops during the week. The three year high was met early on last Friday, 8 September 2017, at 1,332 points, driven by the seasonal high period of coal and iron ore trade from increased construction activities in China.

The latter slip-up in BDI may coincide with typhoon scares that loomed over in the Far East. For instance, typhoon Talim was predicted to make landfall in Taiwan and southern China before the typhoon sideswiped and turned toward Japan instead. However, typhoon Doksuri still threatened China’s southeastern coastlines and Hainan as well as the coastlines of Vietnam.

Despites the threats from powerful typhoons, the short term market outlook was supported by the upcoming China’s Golden week in October, which prompted trade participants to fix vessels ahead of week-long holidays.

“Its too early to call the bull run over and only as the week progresses will we find the markets true level.” said a FIS FFA broker based in Asia.

Capesizes 5 time charter average had a good start at $20,831 on Monday, up $488 day-on-day basis. Then, the charter average went into a slide as the market drew concerns over the uncertainly over typhoons which may potentially disrupt shipping schedules and berth availability. By Wednesday, capesizes charter average finished $19,129, down $813 day-on-day and dipped by 8.17% as compared to starting charter average on Monday.

“The Atlantic saw the sharpest discounting while the Pacific seems to be holding up,” commented a London-based FIS FFA broker. “This may be a short pause from the physical before we see some improvement towards the end of the week.”

It was all a different story for the Panamax market, which gained momentum as the week goes by. After a sluggish start at the week with Panamax Time Charter Average at $11,192, the freight rates progressively ended Wednesday at $11,754, up 5.02% from Monday.

“We finally saw a break out on Panamax paper with gains seen the length of the curve on Wednesday.” observed a FIS FFA broker."

He attributed the break out to good support seen at the highs during the close with the prompts added an average of $500 and October printing at $13,000 high, while Cal18 printed $10,000 several times.

Similar market optimism were seen supramax and handysize with steady gains in rates throughout the week. On 13 Sep 2017, supramax time charter average was posted at $10,097, up $72 day-on-day, and shown an increase of 1.44% from Monday’s rate of $9,953.

“We saw Oct and Q4 pushing up to $11,575 and $11,200 respectively with buyers looking to repeat to the close.” said an Asia-based FIS supramax broker.

Handysize then saw time charter average rose by 2.4% to $7,687 on Wednesday, after starting rate of $7,506 on Monday.

Overall, the typhoons failed to tamper the seasonal peak period of seaborne iron ore and coals movements. Chinese restocking demand remained the main drivers of freight rates, unfettered by the force of nature. This may change in future but do expect BDI to soar further on the back of good seasonal demand.