Shipfix-Global Market Update

The Baltic Dry Index advanced for a third consecutive week amid gains across all vessel segments. The Capesizes delivered the most sizeable gains amid continued robust order volumes in the spot market. In contrast, the commodities endured a mixed week with volatility. Aluminium and European natural gas were among the winners, while coal and iron ore were among the commodities that ended the week in the red.

By Ulf Bergman


Macro/Geopolitics

The new week has begun with renewed concerns over the state of the Chinese real estate sector. After reports of cancelled investor meetings, embattled property developer Evergrande is looking increasingly unlikely to succeed in its efforts to restructure its operations. As a result, an index for Chinese property stocks tumbled the most in nine months during today’s trading and brought the loss in valuation for the year to the region of 55 billion US dollars. The development also contributed to iron ore’s substantial losses. 

In the week ahead, European and US inflation data will be released on Thursday and Friday. In addition, China’s official PMI data for September will be published on Saturday, with markets expecting the gauge for the manufacturing sector to recover to neutral territory.

Commodity Markets

The crude oil markets experienced a week with limited daily moves. After beginning the week in the black, the remainder of the week saw prices drifting lower as concerns over the demand outlook offset tighter global supplies. The November Brent contracts ended Friday’s session at 93.27 dollars per barrel, 0.7 per cent below the preceding week’s close. The new week has seen the contracts staging a comeback with gains during Monday’s early trading. 

European natural gas prices continued to gain ground throughout much of the past week. A renewed focus on supplies supported the prices, and an end to the strike for the Australian gas workers only provided a brief relief. The front-month TTF futures recorded a weekly gain of 9.1 per cent and ended the week at 39.79 euros per MWh. The contracts have also seen a robust start to the current week, with gains approaching ten per cent. 

Despite the rising European natural gas prices, coal retreated last week. After solid gains the week before, the futures for delivery in Rotterdam next month recorded a weekly decline of 1.5 per cent and ended Friday’s session at 123.30 dollars per tonne. The front-month Newcastle contracts faced even greater headwinds, finishing Friday’s trading at 158.50 dollars per tonne amid a weekly decline of 4.6 per cent. 

Iron ore swung between gains and losses throughout the past week, with concerns over the Chinese demand outlook and a stronger dollar contributing to the volatile conditions. Despite a 3.1 per cent gain on Friday to settle at 121.18 dollars per tonne, the October futures listed on the SGX shed 1.4 per cent over the past week. However, Friday’s positive momentum has not carried into the new week, with the contracts recording losses of around four per cent in today’s session. Continued woes for the Chinese property sector and a drop in activities ahead of the upcoming public holidays in the country contributed to today’s losses. 

The base metals also had a week dominated by swings between gains and losses, with the US dollar and the Chinese demand outlook contributing to the shifting fortunes. The three-month copper and nickel futures listed on the LME declined by 2.2 and 2.5 per cent, respectively. On the other hand, the aluminium contracts recorded a weekly gain of 2.3 per cent and zinc rose by 1.6 per cent. 

An improving global supply situation contributed to grain and oilseed futures declining over the course of the past week. The December wheat futures shed 4.1 per cent, while the corn contracts declined by a third of a per cent. The November soybean futures retreated by 3.7 per cent.

Freight and Bunker Markets

The Baltic Dry Index surged by 15.4 per cent last week amid gains across all vessel segments. In line with the preceding two weeks, much of the headline index’s performance originated in the largest segment. The sub-index for the Capesizes surged by 30.0 per cent amid continued robust demand. The Supramaxes also had a solid week amid substantial order volumes during the first few days of the week. Their gauge rose by 11.0 per cent. The gauge for the Handysizes rose by 5.7 per cent, while the Panamaxes were the week’s laggards amid a gain of 1.8 per cent. 

The Baltic’s wet freight indices also had a week with all of the gauges in the black. The dirty tanker index advanced by 6.8 per cent over the past five sessions, while their clean siblings rose by 2.2 per cent during the same period. The freight index for the LPG carriers rose by 18.0 per cent, while the LNG tankers saw their gauge increase by 4.4 per cent.

The bearish sentiments in the crude oil market contributed to headwinds for the bunker fuels last week. The VLSFO retreated by 2.4 per cent over the past five sessions in Rotterdam, while the weekly losses were more modest at around 1.2 per cent in Singapore and Houston. The trading in MGO saw the weekly losses topping 2.1 per cent in Houston and Rotterdam, while the fuel reiterated by 2.7 per cent in Singapore.

The View from the Shipfix Desk

Over the past month, the Panamaxes have been the dry bulk sector’s laggards. While the Baltic Exchange’s freight index for the segment has advanced by more than eleven per cent since late August, the Panamaxes lag their smaller and larger relatives by quite a distance. 

Following a recovery at the beginning of September, global aggregate weekly order volumes for the Panamaxes have faced some pressure over the past fortnight. While demand in the Atlantic and the Indian Ocean has remained robust, a lack of ordering in the Pacific has weighed on the totals. Ordering activities in the Atlantic have been supported by an increased demand for seaborne transportation of agricultural commodities and coal. The latter commodity has also supported the demand in the Indian Ocean.

An increase in vessel supply also contributed to the relative weakness of the Panamaxes. While the supply weakened somewhat in the Atlantic and the Indian Ocean last week, it continued to trend higher in the Pacific, contributing to higher global availability of vessels. Hence, activities in the Pacific may continue to weigh on the Panamaxes. 

Data Source: Shipfix