The Baltic Dry Index advanced for a fifth consecutive session on Thursday, with all vessel segments avoiding the red. Recovering cargo order volumes across the major basins contributed to healthy gains for the mid and small-sized vessels. The commodities generally ended the day higher, but Newcastle coal and crude oil defied the trend and posted limited losses.
By Ulf Bergman
Macro/Geopolitics
The US dollar stabilised yesterday following volatile conditions during recent sessions. While US weekly labour market data released yesterday pointed towards mounting headwinds, traders and investors awaited today’s highly anticipated monthly jobs report, which may influence the direction of the US interest rates in the near term. Acting as an offset for the softer-than-expected jobs data, the US Treasury Secretary reiterated the administration’s support for a strong US dollar and suggested that no pressure will be placed on the Federal Reserve to lower interest rates.
Commodity Markets
Crude oil initially recovered some of Wednesday’s losses yesterday, as Saudi Arabia's state oil company announced a significant price increase for March amid robust Chinese and Indian demand. However, further pledges of higher US production saw prices retreating into the red towards the end of the session. The April Brent futures ended the session at 74.29 dollars per barrel, following a daily loss of 0.4 per cent. The contracts have rebounded in today’s trading amid gains of nearly one per cent.
European natural gas prices extended on Wednesday’s gains during yesterday’s session as falling temperatures across parts of the continent fuelled higher demand and weighed on inventories. The front-month TTF futures rose by 2.0 per cent and settled at 54.02 euros per MWh, the highest closing price since October 2023. After some limited losses initially, the contracts have continued to move higher in today’s session and are trading around one per cent above yesterday’s settlement.
The benchmark futures for the Asian and European coal markets experienced somewhat mixed fortunes yesterday. The March contracts for delivery in the port of Newcastle shed 1.1 per cent, settling at 113.50 dollars per tonne, as traders remained concerned over a potentially over-supplied market. On the other hand, rising natural gas prices offset such concerns in Europe, and the March Rotterdam futures ended the day at 105.70 dollars per tonne, following a marginal gain.
After some limited volatility as Chinese market participants returned following the Lunar New Year holidays, the iron ore prices continued to move higher yesterday, supported by supply disruptions. The March SGX futures ended the day at 105.94 dollars per tonne, the highest closing price since mid-October, following a 2.1 per cent gain for the day. The contracts have remained in the vicinity of yesterday’s close in today’s trading, experiencing some limited volatility.
The base metals rose across the board yesterday, supported by recent days’ downward pressure on the US dollar and supply concerns. The three-month LME copper futures ended yesterday’s session with a 0.4 per cent gain for the day, while the aluminium contracts edged up marginally. The zinc and nickel futures provided the session’s best performances, with the former gaining 1.4 per cent and the latter 1.8 per cent.
Following losses on Wednesday, the grains and oilseeds futures listed on the CBOT continued to move higher yesterday. The March wheat futures recorded a daily gain of 2.7 per cent as traders grew concerned that cold weather in the Black Sea region would cause crop damage. The corn contracts rose by 0.4 per cent, supported by robust export sales. The soybean futures for delivery next month rose by a third of a per cent as crop damage in Argentina amid dry weather weighed on the global supply outlook.
Freight and Bunker Markets
The Baltic Dry Index rose by 2.9 per cent yesterday, extending gains into a fifth consecutive session. It was also the first time in months that all of the Baltic Exchange's dry bulk indices avoided losses during the same session. The supramax indicator led the way higher, outperforming the panamax index and reversing the trend of recent sessions.
While all dry bulk gauges stayed out of the red, it did not translate into gains for all segments. The index for the capesizes remained unchanged for the session as rising tonnage supply offset robust cargo order volumes in the Atlantic. The indicator for the panamaxes recorded a daily increase of 4.1 per cent, extending gains into a seventh consecutive session, with robust demand in the Pacific basin among the contributing factors. The index for the supramaxes rose by 4.8 per cent amid robust demand across the major basins, while the handysize indicator rose by 3.2 per cent for the same reason.
The Baltic Exchange’s wet freight indices recorded modest moves during yesterday’s session. The dirty and clean tanker indicators rose by 0.3 and 0,7 per cent, respectively. The spot gauge for the LNG carriers remained unchanged for a second day, while the LPG index retreated by 0.7 per cent.
After mostly limited gains on Wednesday, the bunker fuels faced renewed pressure yesterday amid lower crude oil prices. The VLSFO shed 1.3 per cent in Rotterdam while retreating by 1.2 per cent in Singapore and 0.6 per cent in Houston. Developments for the MGO were similar, with the fuel declining by 1.2 per cent in the Dutch port and by 1.1 and 0.3 per cent, respectively, in Singapore and Houston.
The View from the Shipfix Desk
As highlighted in recent editions of “The Fix”, cargo order volumes for dry bulk commodities discharging in Chinese ports have experienced a slow start to the year. Compared to the past two years, the aggregate cargo order volumes for spot dry bulk imports were significantly lower in January. On the other hand, cargo ordering activities for Chinese dry bulk exports during the past month were marginally higher than during the same period last year and significantly higher than in 2023.
Among the contributing factors to the robust demand for seaborne transportation of Chinese exports was a slight increase in cargo order volumes for steel loading in the country’s ports compared to January last year. While demand for seaborne transportation of Chinese steel exports declined between December and January by sixteen per cent, last month’s aggregate was three per cent higher than a year ago.
Still, the past two and a half weeks have been soft for Chinese seaborne steel exports as the Lunar New Year has weighed on cargo ordering activities. While the current week has seen a limited rebound in demand, the aggregate looks set to fall well short of the volumes recorded during the year’s first three weeks.
After trending lower since October, Chinese steel rebar prices staged a limited rebound during the middle of January. However, since then, prices have faced limited headwinds. The March rebar futures listed on the Shanghai Futures Exchange ended yesterday’s session broadly in line with the level recorded at the end of last year but around ten per cent below the highs recorded in early October.
Subdued Chinese rebar prices suggest that cargo ordering activities for the country’s steel exports will recover further in the coming weeks. Mounting pessimism over the outlook for construction activities amid muted spending by local governments contributes to the resurgent headwinds for rebar futures. While the latest US tariffs on Chinese imports may contribute to lower growth in the world’s second-largest economy, the marginal quantities of Chinese steel exports bound for the US should limit the impact on the trade.
Data Source: Shipfix