On the plus side is the continuing commodities boom, with iron ore grabbing much of the news headlines as it looks to push past the $100 per mt barrier. Coal prices too are on an uptrend as Chinese authorities consider reverting to a 276-working day year for coal miners from the previous 330 days, as the winter heating season draws to an end in mid-March 2017.
Given the price evolution seen last year, together with the scrapping undertaken by owners of dry bulk tonnage in order to reduce capacity, the mood in the FFA market has been about gearing up for a better market and finally an end to the downturn.
“We could be in for an interesting summer,” commented one FIS FFA broker on the capesize freight rates. “There is now a steep carry from spot to Q2 and from Q2 to Q3 and shipowners can see from the forward curve some light at the end of the tunnel.” he added.
And he might be right after some sweet foretastes of recovery seen during last week. Capesize rates saw steady gains throughout the week to $7,708 on Wednesday, from the starting point of $6,496.
In the meantime, the Baltic Dry Index also followed the uptick and climbed to 806 points on 22 February 2017, up 49 points since the beginning of the week.
Of course, the second quarter of 2017 will prove to the defining moment for this recovery as China’s construction activities will typically peak around this period, pushing up the demand for steel-making materials like iron ore and coking coal shipments that boost tonne-miles.
Moreover, the China-based mills may prefer to import more high grade seaborne iron ore cargoes during the seasonal high Q2 period, due to the stricter environmental protection imposed on domestic steelmakers. By using high-grade iron ore as feedstock for blast furnaces, the steel mills will emit less pollutants to the environment.
Despite the good run of freight rates, the FFA broker owned to some reservations on the market’s bullish run. “With the index now lagging behind paper, we'll need to see another physical drive to keep paper rates firm,” he said.
Certainly the end of the week was as windy as the English weather, with capes seeing a volatile day of trading starting with the Asian session and ending at a high of $9,094, up $1,386 on Thursday. However, the market fluctuations started to fizzle out but stayed near the highs of the day on most of the curve.
The bullish tone persisted on panamax paper too with sharp gains witnessed once again on the prompt contracts as rates surged post-index. Brokers saw good volume changing hands with highs on March and Q2 of $9,000 and $9,975 before drifting lower on the back of some profit-taking but there was some improved buying on the deferred contracts too.
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