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Dry bulk FFA market: Silence is golden

Dry bulk FFA market: Silence is golden
You could have heard a pin drop in the dry bulk freight market during Golden Week - with the exception of the forward freight agreement market.

FFAs have roared away through the week with trading volume increasing at an exponential rate. On Monday, the total FFA volume got off to a slow start with 255 lots traded across platforms like Singapore Stock Exchange (SGX) and Nasdaq.

After that the trading volume rocketed off to hit a remarkable 2,265 lots done - a nine fold increase overnight at 4 October 2016. The flurry of trading activities was carried over to Wednesday as well, recording at 4,340 lots, or nearly doubled the volume traded on the previous day. “There are lot of buyers entering the market recently,” said an FIS broker based in Asia.

The surge of enquiries may be trying to secure fixtures for the year-end or last quarter shipping seasons. However, the hype and excitement of the traded volume differed from ship-sizes as the market slumbered on the lull of the China’s Golden week holidays.

Capesize spot rates started the week sluggishly before they shook off the Chinese festive mood and booked a gain of $453 to hit $12,017 by mid-week. The improvement was due to increased enquiry seen in the Atlantic and the firming rates for the West Australia to East Asia route.

There remain concerns that the tonnage count in the North Atlantic will be plentiful and that this will cap the rises. However in the short term, the paper market is largely ignoring the speculation, apart from some mini sell-offs for profit-taking toward the end of the week.

By contrast panamaxes were caught frolicking in the Chinese beaches during the week-long holiday. Spot rates stayed relatively flat as index drifted back and forth, before steadying itself near the end of the week.

A similar story was seen on supramax as the market thinned with limited activity amid China’s week-long holiday. The paper market remained static with limited activity throughout the day and Oct contract was seen trading $7,300 and the Q4 at $7,100. Meanwhile, the handysize market went on its own getaway during the Chinese holidays and stayed muted throughout the week.

As saying goes, “To rest is to prepare for a longer journey ahead”, the dry bulk freight may be going for its own retreat before heading for an uptick when the market resumes next week.

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