Dry bulk freight market seizes the day

As a result of the surging demand, the Baltic Dry Index rocketed from very low to quite low (1,147 points) on Wednesday, spurred on by the three-day consecutive gains made in capesize rates. By Thursday it had hit a three-month high climbing to 1,172 points.

“Early talk of C5 rates slipping caused a brief pause from paper buyers but Atlantic strength added more fuel to the fire as the trading progressed,” said an FIS FFA broker explaining the capesize market’s rise on Tuesday.

Capesize rates increased by $607 or 5% day-on-day on Tuesday to $14,250 from Monday’s starting position of $13,643, followed by an even greater stride of 10% day-on-day rise on Wednesday to $15,764.

Despite the high demand for raw materials, uncertainty may lie ahead if China enacts a policy of stricter safety regulations and environmental protection measures. The country’s policymakers have extended restrictions on sintering output in Tangshan by a further three days, having an immediate, if temporary effect on the seaborne import of iron ore due to reduced production of the Tangshan mills.

China’s policy-makers have also sent mixed signals on the coal market without clearly specifying whether they will revert back to a 276-working day ‘working year’, a decision expected in mid-March 2017. Instead, they announced that the country will continue to reduce 150m mt of coal this year. However, the statement did not distinguish between thermal and coking coal and the impact on coking coal supply remains ambiguous.

It was a different story on the Panamax market where rates scaled back to $9,248 on Wednesday, down by 5% from the starting point of $9,697 recorded on Monday.

“We witnessed further declines today on panamax paper as the build-up of tonnage on TA/FH business brought with it another sharp decline in the index,” said an FIS FFA broker based in Asia. According to the broker, many panamax sellers have adopted a cautious attitude in lieu of the firmer capesize market.

Panamax sellers continued to apply some pressure to the front of the curve with April and Q2 sold off to $9650 and $9450 before bouncing back somewhat, leaving the prompt months looking relatively flat towards the week’s end.

Supramax rates too remained virtually flat, trading from $9,151 to $9,171 on Wednesday while handysize rates saw steady growth from $7,340 on Monday to $7,413 on Wednesday.

As we approach the end of quarter, perhaps we should remember the words of the great poet Horace who opined "Seize the day, put very little trust in tomorrow” perhaps a fitting epithet for judging the freight market’s current situation against its future prospects.