In Hellenic Shipping News 15/06/2018
A new booming trend has started shaping up in the dry bulk market of late, as the past few days (since the beginning of Posidonia) have marked a rebound in freight rates, which is also evident in the FFA markets as well. In its latest weekly report, shiproker Allied Shipbroking said that “it has been a relatively interesting week for the dry bulk sector, with a fair reversal having been seen in the freight market as some of its most vital commodities start to show a more bullish face. The main interest shifted on the coal trade, a commodity that in the past had shown a relatively troubled picture and had felt a fair amount of negative pressure due to the fact that it was the main target of emission and pollution controls”.
Allied’s Research Analyst, Thomas Chasapis said that “what was the main focus this past week is the sharp surge in prices that has been noted since mid-April, with the price of Newcastle coal peaking on Thursday at US$ 112.05 per metric tonne, the highest level noted since 2012. This success story however has been writing itself since the end of 2017, despite the imposed measures that have been taking place in China, which is the largest importer worldwide and accounting for almost one fifth of total global imports. Imports from China have already risen by around 8% from January to May, while the local coal market shows real strength with ample appetite for the time being”.
Chasapis added that “it is worth mentioning however that the most recent price shift and peaking demand has had as its driver the exceptionally hot weather noted of late, while at the same time the very cold temperatures noted back in January had as a result an excessive draining of local inventories at ports, mines and power plants. So the real question is, to what extent this trend seen in the first half of the year could follow through till year’s close or beyond. The truth of the matter is there are few who are willing to back coal at the moment, as has already been stated many times before, this commodity’s long-term prospects are rather bearish, given the general aversion away from high polluting energy commodities and the general shift towards cleaner alternatives”.
Allied’s analyst also noted that “the focus however is on the here and now and given this most recent trend the dry bulk shipping market has found some much needed support. The Baltic Dry Index (BDI), finished at the end of the previous week at a level close to 1,400 basis points, which was actually similar to the level it started the year at. During these first 5 months the market has shown a considerable amount of volatility, having been shaken back and forth by the extensive geopolitical tensions that have taken place. On the on hand, it is true that the market has shown real strength and strong fundamentals over the past 12 months, managing to sustain relatively well the much higher average levels brought about during the final quarter of 2017. But on the other hand, after every short-term small rally we have witnessed in the year so far, a sharp correction of the same magnitude has taken place, denoting that the market lacks any real underlining support to reach even higher peaks for the time being”.
According to Chasapis, “all-in-all, despite this boost in sentiment as of late, it seems as though the track noted between the different major dry bulk commodities seems to be out of sync and as such has in part been feeding this extensive back and forth shake up in earnings. On the coal front, it looks as though things will eventually subside as China’s inventories start to replenish and while keeping all other variables equal, this could lead to negative pressure being felt once again on freight rates. The hope is that other commodities will move in and fill the gap, with the most prominent contender considered to be grain cargoes at this point, given the slack that was noted during the past two months in the US Gulf”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
