20-08-2018

Dry bulk FFA market: Freight market unfazes by rising trade tension

The Baltic Dry Index (BDI) started the week on firmer foot despite the trade tensions between US, China and Turkey that waned investors’ confidence.

By Wednesday, 15 August 2018, the BDI had hiked progressively since the start of the week to 1,727 points. The rally in BDI seemed unaffected by the US tariffs on Turkish steel and aluminum that sent the Turkish currency, Lira into freefall.

So far, the dry bulk uptick drew strength from the big ships’ charter freight rates where Capesizes and Panamax made good gains in the week.

For instance, the Panamax time charter average started the week at $10,723 before closing at $11,247 on Wednesday, making a gain of $527 in the span of three days.

“We made further gains on the Panamax paper as the physical continues to gather momentum on Wednesday,” commented a FIS FFA broker.

The flurry of activities on Panamax market was a sharp contrast to the Capesize market on Monday, where lethargy set in and many trade participants seemed happy to sit back and wait for some fresh impetus off the underlying making for slow afternoon trading.

Nevertheless, the Capesize 5 time charter average opened the week at $26,059 on Monday, up $438 day-on-day. The upward momentum was maintained on Tuesday, where the time charter further saw gains of $240 to $26,299.

However, the gains made over the past two days soon gave way on Wednesday, as the Capesize 5 time charter average recorded $26,069, down $230 and just a slight gain of $10 from Monday’s starting position of $26,059.

“The 5 time charter index was marked a little lower on Wednesday as some weaker C3 fixtures came to light,” said a FIS FFA broker.

According to him, there was a market rumour of Brazil’s Vale re-entering the Capesize market, taking anywhere between 1-7 vessels directly for early or mid Sep laydays, which backed off the offers.

“With the supply and demand ratio looking evenly balanced, further volatility could be around the corner.” he opined.

Meanwhile, the Supramax market did not have a best start in the week but managed to achieve some small gains along the way. On Monday, the interest down the curve remained thin throughout the day except for Q4 contract that reported trading at $12,450.

Thus, the Supramax time charter average managed to inch up slightly by $10 to $11,211 on Monday before closing at $11,277 on Wednesday with a day gain of $35.

“Supramax paper was subject to another uninspiring day on Wednesday as we continued to drift around the current ranges,” noted a FIS shipbroker.

In Wednesday morning, the Sep contract was trading at the range of $12,100-$12,050. Then, the Q4 contracts traded throughout the day around $12,350-$12,300 range as Q1 contract ticked up slightly to print at $10,950.

In the meantime, Handysize market had quiet trading day on Wednesday, with the time charter average printed at $7,921, unchanged day-on-day.

Source: Freight Investor Services

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