The BDI continued to advance, but the mid and small-sized vessel segments, rather than the Capesizes, provided most of the support. The commodities had a mixed day, with crude oil, coal and iron ore among the winners.
By Ulf Bergman
Macro/Geopolitics
The US dollar recorded modest gains yesterday after beginning the week with a half per cent drop on Monday following reports over the weekend that the Federal Reserve’s policymakers are increasingly uncertain over the need for another interest hike. The limited advance for the greenback came as traders avoided making significant bets ahead of today’s August inflation data release. Markets expect an increase in the annual inflation rate, compared to July, to 3.6 per cent amid higher energy prices. While the US central bank is widely expected to keep interest rates steady next week, any significant deviation from the consensus projection could see the dollar move as markets readjust their expectations for further hikes later in the year.
Commodity Markets
Crude oil prices continued to move higher yesterday as OPEC said it expects the global market to tighten later in the year amid rising demand and continued output curbs. The November Brent futures advanced by 1.6 per cent and settled at 92.06 dollars per barrel. The contracts have also recorded gains of around half a per cent in today’s early trading.
After beginning the week with substantial gains, European natural gas prices came under pressure yesterday amid reports of lower European demand. The front-month TTF futures shed 3.7 per cent and ended the session at 34.51 euros per MWh. However, the contracts have staged a recovery in today’s trading with gains of around two per cent.
Coal prices extended on Monday’s gains during Tuesday’s trading amid higher demand on the back of the Australian gas workers’ strike. The Newcastle futures for delivery in October rose by 1.6 per cent, settling at 162.50 dollars per tonne. The contracts for delivery in Rotterdam next month recorded a daily gain of 1.9 per cent and ended the session at 118.50 dollars per tonne.
Expectations of robust Chinese steel production contributed to iron ore prices advancing for a second consecutive session on Tuesday. The October futures listed on the SGX rose by 1.4 per cent to 119.05 dollars per tonne, the highest closing price since the end of March. The contracts have continued to advance today, albeit marginally.
The advancing dollar weighed on base metals yesterday. Nickel led the way lower, with the three-month futures listed on the LME ending the session with a 2.7 per cent loss, while the zinc contracts recorded a daily decline of 1.2 per cent. Copper and aluminium faced lesser headwinds, with the contracts for the former shedding 0.1 per cent and the latter’s retreating by 0.4 per cent.
The grain and oilseed futures listed on the CBOT faced diverging fortunes yesterday. The December wheat contracts advanced by 0.5 per cent amid a renewed focus on global supplies. In contrast, the corn contracts shed 1.9 per cent as the monthly WASDE report indicated higher production amid higher acreage. Likewise, the November soybean futures also faced headwinds on suggestions of higher production and retreated by 1.6 per cent.
Freight and Bunker Markets
The Baltic Dry Index advanced for a fifth consecutive session yesterday. However, unlike in recent days, most of the positive contributions came from the mid and small-sized segments rather than the Capesizes. The headline index advanced by 2.2 per cent and contributed to the 16.2 per cent gain for the past five days. The freight rate indicator for the Panamaxes increased by 4.4 per cent as the new week has seen some pressure on tonnage supply. The Supramaxes and Handysizes saw their sub-indices gaining 1.7 per cent. In contrast to recent days, the gauge for the Capesizes only saw a modest half per cent gain.
The Baltic’s wet tanker indices all had a day in the black yesterday. The dirty tanker index had a second day of marginal gains, with the gauge increasing by 0.3 per cent. The clean tanker index rose by 3.3 per cent after a marginal loss at the start of the week. The indicators for the LNG and LPG carriers rose by 6.1 and 1.1 per cent, respectively.
The trading in bunker fuels had a mixed session across the world’s leading maritime hubs on Tuesday despite rising crude oil prices. The VLSFO retreated marginally in Singapore and Rotterdam while advancing by 1.0 per cent in Houston. In the case of MGO, the fuel recorded daily gains of 1.1 and 0.6 per cent in Singapore and Houston while retreating marginally in Rotterdam.
The View from the Shipfix Desk
The season for US agricultural exports is upon us. In recent weeks, demand for seaborne transportation of grains and oilseed from US ports has seen a seasonal rebound and increased significantly. Order volumes for cargoes loading in the ports in the US Gulf have been around 2.5 million tonnes during the past four weeks, while the demand for shipments from the West Coast has seen a weekly average of 750,000 tonnes during the same period. The current week has also started strongly, with aggregate volumes exceeding one million tonnes during the first two days.
After trending lower during the first three weeks of the past month, the past week saw the typical cargo sizes increase, with the average shipments from the US West Coast approaching 60,000 tonnes. On an aggregate basis, Supramaxes and Panamaxes dominate the trade, with both segments recording increasing demand as ordering activities picked up in the past months. However, the Supramaxes have lost out somewhat to their larger siblings in the past week, with the Panamaxes increasing their share of the trade. Still, the higher order volumes will provide support for freight rates in the mid and small-sized vessel segments.