By Ulf Bergman
Macro/Geopolitics
In recent days, the US dollar has given up some of the gains recorded during the past week and on Monday. Comments from the Chair of the Federal Reserve, which suggested that the disinflationary process has already started, have been received by the markets as less hawkish than previous statements, which has contributed to the reversal of fortunes for the greenback. However, fears remain that the robust labour market data released last week will stimulate consumer spending and renew the upward pressure on inflation rates. Hence, the dollar’s retreat has been modest as traders and investors await next week’s release of US inflation data for January.
Commodity Markets
Crude oil gained on Wednesday amid reports of greater demand from Chinese refineries. The Brent April futures extended on the gains from the previous two sessions and settled at 85.28 dollars per barrel amid a daily advance of 1.9 per cent. However, today's session has seen the contracts remaining broadly unchanged.
Expectations of milder weather in the coming week weighed on the European natural gas prices yesterday. The front-month futures declined by 3.1 per cent and ended the day at 53.69 euros per megawatt-hour. However, today’s early trading has seen most of yesterday’s losses reversed.
Thermal coal prices came under renewed pressure yesterday amid weaker demand for tight global supplies. The falling natural gas prices and milder weather in Europe saw the front-month futures for delivery in Rotterdam dropping nearly six per cent and settling at 126 dollars per tonne. The March Newcastle futures fared even worse and declined by 8.9 per cent, which resulted in the contracts ending the day at 229 dollars per tonne.
After two days of considerable losses, the March iron ore futures listed on the Singapore Exchange recorded marginal gains on Wednesday. The contracts edged up by 0.3 per cent and ended the session at 121.37 dollars per tonne. The gains have accelerated in today’s session, with the contracts trading around two per cent above yesterday’s close.
Except for aluminium, the base metal futures trading on the London Metal Exchange embed yesterday’s session with only marginal price moves. The copper and zinc contracts shed 0.4 and 0.1 per cent, respectively, while nickel recorded a half per cent gain. On the other hand, the aluminium futures dropped by 1.7 per cent amid rising global inventories.
Following a period of minor daily moves, the March wheat futures trading in Chicago gained 1.9 per cent yesterday amid rising export inspections for the grain. In contrast, the soybean and corn contracts recorded only minor gains, with the former advancing by 0.3 per cent and the latter ending the day 0.7 per cent higher than Tuesday’s close.
Freight and Bunker Markets
After five consecutive days in the red, the Baltic Dry Index recorded a marginal gain yesterday. Following a seven per cent increase for the Capesize freight gauge amid signs of a recovery in ordering activities, the headline index gained 0.3 despite declines for the Panamaxes and Supramaxes. The former segment saw its freight rate index shed 1.3 per cent, while the gauge for the latter dropped by 2.4 per cent. The sub-index for the Handysizes remained unchanged for the day.
The Baltic’s clean tanker index advanced for a fourth consecutive day. Following a run of days in the red that began at the end of December, yesterday’s 7.4 per cent gain contributed to a partial recovery. In contrast, the dirty tankers saw their run of losses extend into a thirteenth session amid a loss of 0.4 per cent. The freight index for the LPG carriers continued to give up some of the recent robust gains amid a 2.5 per cent loss on Wednesday, while the LNG freight gauge remained unchanged.
Rising crude oil prices provided support for higher bunker prices in most cases yesterday. The trading in VLSFO saw gains of around two per cent in Singapore and Rotterdam. However, the day developed in the opposite direction in Houston, where prices dropped by 1.3 per cent. The MGO also recorded gains on Wednesday. The fuel advanced by 4.8 per cent in Rotterdam, 3.8 per cent in Singapore and one per cent in Houston.
The View from the Shipfix Desk
French farmers were bringing parts of central Paris to a standstill yesterday as they were driving their tractors through the streets of the Capital in protest against a ban of a pesticide, which has reduced the country’s sugar output. The prohibition of neonicotinoids across the European Union, combined with hot and dry summers, has resulted in increasing imports of the sweetener for the continent. This has contributed to sugar prices rising to levels not seen since 2016 in recent days.
However, the recent surge is likely to be temporary, as the world is expected to have a surplus of the commodity during the coming year amid projections of a Brazilian record crop. Aggregate global cargo orders rebounded in January ahead of the Brazilian harvest, surpassing the global volumes recorded during the same month in recent years. February has also seen a strong start to activities, with average cargo sizes for Brazil continuing to recover. However, it looks like Indian exports will fall short of what was recorded a year ago amid low yields and more sugar canes being diverted to ethanol production.
A thaw in diplomatic relations between China and Australia and an increasing focus on economic growth in the world’s second-largest economy has resulted in an easing of the previous restrictions on imports of Australian coal.
Data Source: Shipfix