Markets show renewed optimism as commodity trades flourish

Markets show renewed optimism as commodity trades flourish
Published: 17 November 2009

The dry bulk market continued its strong advance mid-November with all sectors involved, but mostly pushed upwards by the strong demand for capes and panamaxes. The BDI went over the 4000 point ending the week about 21% higher at 4111. The BCI surged ahead closing nearly 29% higher and ending just below 7200 points, whilst the BPI added nearly 12% ending just below 4000 points.

The strong demand for iron ore and coal, as well as the strong US grain trade, has largely been responsible for this market upswing which is also spilling into the smaller handy sectors where the BSI and BSHI added almost 14% and 10% respectively. Furthermore, the comeback of the traditional European and non-Chinese Asian players in both energy and steel sectors is making the game a bit more lively and diversified.

Figures regarding overcapacity in China steel production have also hit the headlines with the latest release putting current capacity at 600Mt with 57Mt under construction, while other figures put the “effective” crude steel production at 550Mt for the whole year 2009. Despite the success of the stimulus package, authorities fear development of over-capacity and want to enforce a plan mixing cuts in outdated capacity, mergers and production caps.

In recent weeks a number of brokers have noted a combination of factors which helped boost the dry cargo market, to name but a few:
- strong demand for iron ore and coal
- renewed congestion in the main iron ore and coal import ports in China and export ports in Australia and Brazil
- strong grain trade
- slippage of newbuilding deliveries
- continuous demolition of older dry cargo vessels.

The rise last week on all Panamax routes was also remarkable. The Atlantic market was driven up some US$4737 over the week in a fixing frenzy on voyage, time charter trip and period. The Pacific also contributed a gain of US$3,000 on the Pacific round-voyage. There was high liquidity in the period market, both long- and short-term fixtures being concluded and short period hitting US$26,000 for dely in the east and up to US$33-34,000 in the Atlantic (reports brokers Barry Rogliano).

There seems no immediate end to the demand side, which has been reflected in the paper market. The ferocity of this particular upswing surprised many punters but the confidence shows no signs of evaporating just yet. More of the same is expected over the coming week.

The Supra/Handy market also proved very lively. The Far East came out of its lethargic status with plenty of short period fixing. Levels are now being pushed over US$20,000 for modern Supramax. Pacific rounds getting close to the magic figure thanks to lots of coal, iron ore and nickel ore shipments. India saw pretty healthy numbers as well, with the WC India / China run between US$21.0 and US$23.0 per ton. The Atlantic is also on the move again with grain and sugar stems paving the way for further improvements. It is noticeable that the strong Indian market is drying up the flow of ballasters across South America.  The US Gulf saw healthy levels with rates in excess of US$30,000 being paid for trips to the Far East and high US$20,000 to the Continent or Med Sea. Scrap and grain cargoes keep the Continent alive. The same goes for the Black Sea although owners are ready to heavily discount in order to keep their ships on that side of the world.