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Dry Bulk Market Looking for a Clear Direction

The dry bulk market is looking for a steady course of late, as volatility seems to have established itself as the main trend. In its latest weekly report, shipbroker Allied Shipbroking said that “it is rather difficult to describe the current situation in the dry bulk sector, given the disarray that has been noted in the freight market during the past few weeks or so. The big step back in earnings halfway through the 4th quarter of the year, makes this shake up reasonable at the moment. As we have mentioned in earlier market views, the downside risk is present and, for those involved, the recent “tight window” to adjust properly to the recent hefty shifts in the market has been a reminder of just that. Steep corrections in the spot market are not a new concept in shipping markets and do not easily arise concerns (if their duration is not prolonged), especially at the current freight market levels we are seeing when compared to recent history. However, there are trends that support this emphatic trajectory in this sector and overall sustainability of the market at the same time. The below graph gives an idea of this. Having used the average return figures for forward curves of FFA contracts with swap period within the next 3 years (2022, 2023, 2024), it is rather obvious that the current forward view is heavily influenced by current freight market sentiment (and momentum). Obviously, no one argues that these two markets should move independently, but the level of current dependency seems to be rather “problematic”. The same trend, more importantly, is also taking form in the SnP market, with the current “bidask” spread in asset price levels seemingly being on the rise”.

Source: Allied Shipbroking

According to Allied’s Research Analyst, Mr. Thomas Chasapis, “albeit being at an early stage in the game, this situation of late can have however multiple interpretations. An interesting one would be of a market aiming for its macro balance levels, whilst moving within different support-resistance levels. Another theory would be that there are many parties involved who seek stability through “meanreverting” strategies (i.e., average spot freight numbers of the past 3 or 5 years, etc.), when the uncertainty of where we stand in the economic cycle is on the rise.

Source: Allied Shipbroking

I would personally point as overall causes the present fragile (volatile) macros, the mispricing of market risk, the general regulatory and technological transition period we are going through, as well as additive noise through the pluralism of different dynamics that push and pull the market across all directions”.

In a separate note this week, shipbroker Banchero Costa commented on the Capesize market by noting that it was a“negative week for Capesize indexes, which saw a new drop in numbers, erasing last week’s hope for a freight rate revival. Despite the positive sentiment recorded on Thursday and Friday, rates have been falling for nearly 6 weeks. Overall, the situation remains unchanged, with demand returning to normal levels and supply remaining strong despite severe weather in the far east, which may cause some delays. BCI closed down on Friday at $3,610, a loss of 226 points, with some improvement expected by the end of the week. The 5TC index followed the same trend, closing at $29,938/d (-1,873), returning below the 30k levels broken last week. Out of the Pacific, the standard C5 route from West Australia/China lost some ground over the previous week’s gains, closing on Friday at $12.56/mt, a loss of 0.36 points. Except for the last day of the week, when higher numbers were agreed, the market was stable for almost the entire week, with fixtures below 11 levels. Indeed, the related Transpacific Round Voyage followed the same path and closed negatively at $31,562/d (- 1,909). Out of Brazil, the situation remains unchanged, with miners supplying the year’s final requirements, primarily for the second half of December and already some for the beginning of January, but limited output appears to be continuing.

banchero costa &c s.p.a.

The baltic index of the C3 route from Tubarao to Qingdao fell further after last week’s improvement, closing at $26.09/mt, a 0.44 point drop. As a result, the related China-Brazil round trip time charter rate was lowered down to $24,582/d, resulting in a daily income loss of $786. Nothing new for the C17 route from Saldanha Bay to Qingdao, which is directly affected by fluctuations on its sister routes C3 and C5, confirming the momentum of ups and downs that has been going on for three weeks, bouncing between mid low 19 and mid low 20, closing this week at $19.79/mt (- 0.30 USD), erasing last week’s improvement. Despite the previous week’s relative quietness, it was a more active week in terms of trading and fixtures outside of the Atlantic region. Freight rates appear to be correctly assessed, given the large gap between bids and offers last week, but remain negative. Indeed, the C8 14 Gibraltar/Hamburg transatlantic round voyage ended negatively at $33,500/d, a total loss of 3,505 points, despite gains on Thursday and Friday. The same is true for the C9 14 Continent/Mediterranean trip China-Japan (Front Haul), which closed at $48,550/d, a $975 decrease”, the shipbroker concluded
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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