Dry Bulk: Freight Rate Market Could Be Heading for a Rebound in the Coming Weeks
According to Mr. Thomas Chasapis, Quantitative Analyst with Allied, “the below graph can give us a small idea of forward sentiment in the dry bulk sector. We have used historical data over a 6-month period of closing swap rates for FFA contracts regarding the final quarter of the year for the benchmark spot TCA figures across all the main size segments. With just a quick glance, the downward pressure noted since the early part of the summer period becomes apparent. Someone could argue that from a seasonality point of view, temporary corrections in the market should not be a main cause for concern. In earlier market views, using technical analysis oscillators, we argued that downside risk is on the rise”.
“The market confirmed this with a relatively emphatic bearish trajectory. According to what the FFA market shows, the new “balance” in freight numbers indicate a different market regime to be seen even on a short-term basis, adding new challenges in terms of cash flow management and performance targets. At the same time, asset price levels remain inflated, while a potential negative adjustment (if materialized) is a longer-term process, amidst the increasing orbit of both the market’s volatility, as well as the cost of borrowing. All -in-all, the realized pressure within the dry bulk sector is slowly extending beyond the spot freight market”, Mr. Chasapis said.
“All-in-all, we should mention that the FFA market does not necessarily adequately capture the general sentiment within the dry bulk sector, given that it is a relatively niche market with its own unique dynamics. For the time being, given that total open interest has decreased as well lately, it may well suggest that an upward trend reversal can be expected, especially as we move past the summer period and into seasonally more active months. Notwithstanding this, as for the overall sector, the paper market has given a hint of some worrying signs being present on the horizon”, Allied’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide