Dry Bulk Market Receives Boost From US Election Outcome
In its latest weekly report, shipbroker Allied Shipbroking said that “it would be quite superfluous to discuss once again the bizarre state of global markets. The level of disarray is high, while for the time being at least, precariousness seems to be a constant variable. Since the onset of the Covid-19 pandemic, things remain relatively fragile, given the exaggerations and asymmetries derived from any sharp shift in the state of this epidemic. As we have already noted, there is hardly any room to make robust “conjectures” in terms of what to expect next. As such, the goal here is to seek out any stable indicators, to support any forward projections”.
According to Allied’s Research Analyst, Mr. Thomas Chasapis, “the highlight of this week has undoubtedly been the US presidential elections, given the high level of uncertainty in respect to its outcome. There is a lot of analysis and debate to be had as to how financial markets will move after the elections, either on a short or long-term basis. Usually the re-election of the incumbent president (which is usually taken as a given) is seen as a positive sign (signaling stability), while in the case of a new president, any assumptions are to be taken with a pinch of salt given that we are entering new territory. However, we should not forget that these trends were under a much more stable environment and may not exactly fit the current race given the candidates involved”.
Chasapis added that “at this moment, the hope is that the US economy will move onto a more stable trajectory, with less noise coming from any domestic political turmoil. This is significant, as turbulence here can very quickly spill over to shipping markets, especially if we experience a change in political direction on matters such as US – China trade relations. A difficult question to take up is as to what if any significant changes we can expect to see during the remaining weeks of the year in the dry bulk sector. The stable variable of late, that has added a glimpse of optimism and good momentum, has been the rally in the SnP market in terms of activity being noted”, he noted.
According to Allied’s analyst, “regardless of the underlining reasoning behind this, a modicum of bullish sentiment has spilled over across the whole dry market. On the other hand, things are quite different in the freight market. For the Capesize market, the step back has been significant, with the BCI 5TC average value reaching in the early part of November close to a 5-month low. With roughly just below 2% softening noted in China’s iron ore monthly imports in October, in addition to increasing portside inventories, this downward correction has been hardly a surprise”.
“Moreover, given the year-to-end of October increase reaching close to 11% compared to what we saw during the same period last year for total iron ore imports into China has translated over to such a discount in average freight levels, what sort of change in pace could trigger a new rise in freight returns? As for the other size segments, there has been a relatively attuned correction as of late, with Supramax, and mostly, Handysize though, indicating a downward resistance. Taking also a quick glance in forward sentiment metrics, the FFA market has also been under pressure during the past month, given the corrections seen in the underlying indices. The bearish view in the spot market since the very beginning of the final quarter has not only affected contracts with duration due year end. The pessimistic attitude has now spilled over to the 1st half of 2021, especially in the bigger size segments. All-in-all, the dry bulk market seems to be struggling to find a positive angle to push things over onto a “better” trajectory. Let’s hope that better things prove to be in store for the market moving forward”, Chasapis concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide