1 11 Mar ±∆ ±% BDI 388 p 39 11.2% BCI 176 p 12 7.3% BPI 477 p 91 23.6% BSI 420 p 49 13.2% BHSI 249 p 17 7.3% W-O-W change Strong volality and a general shake up in the commodies markets has been the main descripon of this past week’s events and connuing on from last week’s arcle it is more and more evident that most traders in the market are fairly confused at the signs being given. Last week the commodies markets (especially in the case of most dry bulk commodies such as iron ore and coal) noted a firm hike in prices both in the futures and physical markets. This was largely driven by China’s Naonal People’s Congress which discussed the proposed changes and targets it plans to put through for its next five year plan (poinng to the major role China sll plays not only in the physical markets of these commodies but also in the minds of most investors world- wide). Speculaon was rife, as some sought to take a more opmisc view as to what was coming out of China. Most of these traders might have been overeager to pull the trigger on their investment strategies, inpaent as to when the market would turn. However it seems as though they might have miscalculated the ming, having avoided to read some of the fine print from China’s next smulus plan. As such we have started off the week with the biggest two-day slide in commodity prices, while in turn this has had knock off effects on global stocks and other financial instruments. At the same me the recent decision by the Bank of Japan to jump off the smulus bandwagon hindered by the growing underlining risk of a negave inter- est-rate strategy has leſt further woes for the global economy. As such, much is leſt in queson as to the true direcon of global economic growth. Of course, in the physical market, the actual upck in demand (and therefore in prices) of iron ore have been more reliant on supply, demand and inventories as always ra- ther than mere expectaons of financial markets. However, once you take a closer look, these are more near-term in nature. Namely low inventories and the prospects of a forced stoppage in the output of several sll mills in China over the summer months, have pushed many to scramble for ore while trying to operate at full capacity in order to build stocks of metals so as to be ready to supply the seasonal pickup in construcon in spring. This chain has more to do with seasonality then any polical decision undertaken, however it does hold a small truth as to the state of the market. Expectaons are that new real estate construcons are slowly going to pick up, based on the increasing level of home sales and higher prices. Home prices have risen by as much as 50% in some of China’s most popular cies over the past year, poinng to potenal shortages in comparison to rising demand. The clarificaon here is that this trend is sll held within a few key cies, while the excess backlog in real estate supply across the whole of China is sll fairly big. At the same me there are some who fear that this is more of a bubble rather than an indicator as to the state of real demand. Efforts have been made by the central government to push demand for the housing markets outside the main five hoest markets, yet the results have been meagre so far. In conclusion, aſter the dissipaon of the inial hype, the fog has cleared to the reality that lile is clear as of yet as to the true effecveness of China’s next growth smu- lus. The dry bulk market may have bolstered slightly over the past week, but it’s too early to have been caused by any shiſt in fundamentals from anything decided in Bei- jing this past week. George Lazaridis Head of Market Research & Asset Valuaons 07 th - 11 th March 2016 | Week 10 Dry Bulk Freight Market Secondhand Market Newbuilding Market Demolion Market Economic Indicators Tanker Freight Market 11 Mar ±∆ ±% BDTI 833 p 113 15.7% BCTI 502 q -16 -3.1% W-O-W change Avg Price Index (main 5 regions) 11 Mar ±∆ ±% Dry 215 p 26 13.8% Wet 237 p 30 14.5% W-O-W change Aggregate Price Index 11 Mar ±∆ ±% Bulkers 78 q -1 -1.5% Cont 99 q -1 -0.7% Tankers 99 q -2 -1.5% Gas 99 q -1 -1.1% M-O-M change 11 Mar ±∆ ±% Gold $ 1,265 p 153 13.8% Oil WTI $ 39 p 8 24.6% Oil Brent $ 40 p 6 18.1% Iron Ore 57 p 13 28.4% Coal 57 p 3 5.6% M-O-M change Aggregate Price Index 11 Mar ±∆ ±% Capesize 36 q -1 -2.5% Panamax 33 q -1 -1.6% Supramax 35 q 0 -1.0% Handysize 42 q 0 -1.1% M-O-M change VLCC 105 q -4 -3.7% Suezmax 93 q -6 -6.4% Aframax 111 q -7 -6.0% MR 120 q -3 -2.1%
Transcript
1
11 Mar ±∆ ±%BDI 388 p 39 11.2%
BCI 176 p 12 7.3%
BPI 477 p 91 23.6%
BSI 420 p 49 13.2%
BHSI 249 p 17 7.3%
W-O-W change
Strong volatility and a general shake up in the commodities markets has been the
main description of this past week’s events and continuing on from last week’s article
it is more and more evident that most traders in the market are fairly confused at the
signs being given. Last week the commodities markets (especially in the case of most
dry bulk commodities such as iron ore and coal) noted a firm hike in prices both in the
futures and physical markets. This was largely driven by China’s National People’s
Congress which discussed the proposed changes and targets it plans to put through
for its next five year plan (pointing to the major role China still plays not only in the
physical markets of these commodities but also in the minds of most investors world-
wide). Speculation was rife, as some sought to take a more optimistic view as to what
was coming out of China. Most of these traders might have been overeager to pull the
trigger on their investment strategies, inpatient as to when the market would turn.
However it seems as though they might have miscalculated the timing, having avoided
to read some of the fine print from China’s next stimulus plan.
As such we have started off the week with the biggest two-day slide in commodity
prices, while in turn this has had knock off effects on global stocks and other financial
instruments. At the same time the recent decision by the Bank of Japan to jump off
the stimulus bandwagon hindered by the growing underlining risk of a negative inter-
est-rate strategy has left further woes for the global economy. As such, much is left in
question as to the true direction of global economic growth.
Of course, in the physical market, the actual uptick in demand (and therefore in prices)
of iron ore have been more reliant on supply, demand and inventories as always ra-
ther than mere expectations of financial markets. However, once you take a closer
look, these are more near-term in nature. Namely low inventories and the prospects
of a forced stoppage in the output of several still mills in China over the summer
months, have pushed many to scramble for ore while trying to operate at full capacity
in order to build stocks of metals so as to be ready to supply the seasonal pickup in
construction in spring. This chain has more to do with seasonality then any political
decision undertaken, however it does hold a small truth as to the state of the market.
Expectations are that new real estate constructions are slowly going to pick up, based
on the increasing level of home sales and higher prices. Home prices have risen by as
much as 50% in some of China’s most popular cities over the past year, pointing to
potential shortages in comparison to rising demand. The clarification here is that this
trend is still held within a few key cities, while the excess backlog in real estate supply
across the whole of China is still fairly big. At the same time there are some who fear
that this is more of a bubble rather than an indicator as to the state of real demand.
Efforts have been made by the central government to push demand for the housing
markets outside the main five hottest markets, yet the results have been meagre so
far.
In conclusion, after the dissipation of the initial hype, the fog has cleared to the reality
that little is clear as of yet as to the true effectiveness of China’s next growth stimu-
lus. The dry bulk market may have bolstered slightly over the past week, but it’s too
early to have been caused by any shift in fundamentals from anything decided in Bei-
jing this past week.
George Lazaridis
Head of Market Research & Asset Valuations
07th - 11th March 2016 | Week 10
Dry Bulk Freight Market
Secondhand Market
Newbuilding Market
Demolition Market
Economic Indicators
Tanker Freight Market
11 Mar ±∆ ±%BDTI 833 p 113 15.7%
BCTI 502 q -16 -3.1%
W-O-W change
Avg Price Index (main 5 regions)
11 Mar ±∆ ±%Dry 215 p 26 13.8%
Wet 237 p 30 14.5%
W-O-W change
Aggregate Price Index
11 Mar ±∆ ±%Bulkers 78 q -1 -1.5%
Cont 99 q -1 -0.7%
Tankers 99 q -2 -1.5%
Gas 99 q -1 -1.1%
M-O-M change
11 Mar ±∆ ±%Gold $ 1,265 p 153 13.8%
Oil WTI $ 39 p 8 24.6%
Oil Brent $ 40 p 6 18.1%
Iron Ore 57 p 13 28.4%
Coal 57 p 3 5.6%
M-O-M change
Aggregate Price Index
11 Mar ±∆ ±%Capesize 36 q -1 -2.5%
Panamax 33 q -1 -1.6%
Supramax 35 q 0 -1.0%
Handysize 42 q 0 -1.1%
M-O-M change
VLCC 105 q -4 -3.7%
Suezmax 93 q -6 -6.4%
Aframax 111 q -7 -6.0%
MR 120 q -3 -2.1%
2
2015 2016
07th - 11th March 2016
Capesize - Still no clear direction in sight for the large capesize segment, though
they managed to close off the week with a slight gain in the main index thanks to
slightly higher spot rates given out of Australia and South America. The market
however is still dragging its feet, unwilling to move in any clear direction quickly
and with a plethora of tonnage still lurking open in the market, it will be hard to
see a quick positive outcome to materialize over the next couple of days.
Panamax - Things quickly started to heat up in the Panamax market, as the North
Atlantic started to feel strong gains, being heavily supported by the still active
ECSA trade which has been keeping tonnage busy for more then two weeks now.
The Pacific was also quick to step up to the plate, giving another boost on that
side, also benefiting from the limited open tonnage thanks to the previous flux of
ballasters that headed westward, while the was also a good flow of fresh inquiries
to keep things hot.
Supramax - Things were almost equally active in the Supramax segment, with all
major routes showing strong gains on a week-on-week basis. The Pacific was
slightly lagging, though the gains should start to catch up there as well. A good
inflow of fresh enquiries should keep things in the green over the next couple of
days, though for now the main gains will likely hold mainly in the North Atlantic.
Handysize - A positive feel, though slightly softer then what the rest of the size
groups were noting. The market here is still not showing a clear picture as to its
strength, causing a lack of sentiment to get things going further.
