Summer Break Recap and Market Updates
Hello listeners, and welcome back to another episode of Freight Up, the freight and commodity podcast of Freight Investor Services. I'm Jess, and alongside my co-host Davide, we're thrilled to guide you through the latest updates in the major freight and bulk commodity markets.
It's been a busy few months since our summer break, and today we have a packed line-up for you.
First, the latest news from the UK, US, China, and Japan, examining their economic landscapes and key index movements.
Then, the dry freight market with insights from our regular expert, Ben Klang, who will break down the weekly gains and fluctuations across vessel segments.
Next, we'll shift our focus to the iron ore market with Hao Pei from our Shanghai office, who will analyse the significant price hikes influenced by the Chinese PBOC's stimulus package.
Finally, Archie Smith will give us all the details on the volatile fuel oil markets, covering everything from crude price swings to high and low sulphur oil trends.
It's a comprehensive look at the state of the industry, packed with expert insights and crucial market data.
So, click play, as we bring you the most up-to-date analyses on Freight Up!
Timestamped summary
00:00 China's industrial growth slows; Japan's inflation rises.
04:33 Weekly vessel gains amid fluctuating Cape and Panamax.
09:19 Iron ore prices surged due to unexpected Chinese policy changes.
13:47 Short-term oil support: Chinese efforts, US storms.
15:03 Fuel prices fluctuating heavily, high sulphur premium in Europe.
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Hello and welcome back to freight up, the freight and quantity podcast of freight
Speaker:investor services. My name is Jess and together with Davide, we will be your
Speaker:hosts as we navigate our major freight and bulk commodity markets. We are back
Speaker:after our summer break and quite a lot has happened since you last heard from
Speaker:us. Hello from me as well. I hope that you really had a nice and
Speaker:relaxing summer. So let's see what we have on the menu today.
Speaker:We have our regular update on drive freight with Ben Clang. How
Speaker:pay a resident from Shanghai will tell us more about the iron ore
Speaker:market and then we'll end up with Archie's meat, who will give us the
Speaker:latest take on fuel oil. But as usual, if you still remember how
Speaker:we used to do things, let's first take a look at the latest news and
Speaker:the index movements over the last two weeks.
Speaker:In the UK, the unemployment rate fell to 4.1%
Speaker:from May to July, down from 4.2% in the previous three
Speaker:month period. Aligning with market expectations, the british economy
Speaker:stalled again in July 2024, mirroring June's performance
Speaker:below market forecasts that we're expecting a
Speaker:0.2% increase. The bank of England keeps rates
Speaker:unchanged at 5%. In the US, the core inflation rose
Speaker:by 0.3%, slightly above forecasts of a
Speaker:0.2% increase, while the annual rate stood at an
Speaker:over three year low of 3.2% in August,
Speaker:matching July's figure. The Fed also decreased the target range for
Speaker:the Fed fund rate by 50 basis points to
Speaker:4.75% to 5% in September
Speaker:2024, the first reduction since March of
Speaker:four years ago. In China,
Speaker:the industrial production year on year in August rose by
Speaker:4.5% in August 2024, falling
Speaker:short of mackere forecast of 4.8% and slowing
Speaker:from a 5.1% increase in July. Looking at retail
Speaker:sales, they grew by 2.1% year on year, down
Speaker:from the 2.7% growth of July, and
Speaker:they've missed market consensus at 2.5%. The
Speaker:People's bank of China also cut its short term interest rate by ten
Speaker:basis points. In Japan, the annual inflation
Speaker:rate rose to 3.0% in August
Speaker:from 2.8% in the prior three months, pointing to the
Speaker:highest level since October 2023. However,
Speaker:the bank of Japan kept its short term interest rate at around
Speaker:0.25% in September. This is the highest since
Speaker:2008, and this was in line with the market
Speaker:consensus. Now let's have a look at the
Speaker:market movements of the last two weeks
Speaker:on the Capes front, the C five TC had a
Speaker:dipless tweak and the Hindex hit
Speaker:$25,623 on Tuesday, the
Speaker:17 September, coming back to
Speaker:$27,378 yesterday, regaining
Speaker:some of the lost ground. When it comes to Panamaxes, the index
Speaker:had been rising for the past two weeks. The P five
Speaker:TC is up and it was. In fact it was at
Speaker:$11,852 on the 10 September and
Speaker:has gained $2,200, hitting
Speaker:$14,039 yesterday. On the
Speaker:s ten TC there have been also some positive
Speaker:news, but somehow it moved less and it went
Speaker:from the $13,865 of two weeks
Speaker:ago to the $14,553 off
Speaker:Tuesday, the 23 September. Smaller ships have been also
Speaker:hovering below the $13,000 mark. The
Speaker:HS 70 C went from
Speaker:$12,840 of the 10 September to
Speaker:the $12,795 of the 23rd.
Speaker:Iron ore status gained $1.30
Speaker:in the week between the 10th and the 23 September and it went up
Speaker:to $94.60 yesterday.
Speaker:And now let's talk about drive freight with Ben Klang. Hi Ben.
Speaker:Hello. How are you, Jess? Not too bad. I'm glad to be back. It's
Speaker:good to have you back on the podcast as well. Yes, likewise. It's nice
Speaker:that the routines are coming back. Exactly. Especially now when it's
Speaker:so busy on the market. Exactly. We've got a lot of stuff to talk about,
Speaker:so could you please walk us through the key movements in the dry freight
Speaker:FFA market over the past week and how the different vessel
Speaker:segments performed. All vessel segments posted weekly gains,
Speaker:though there was fluctuations throughout last week. The
Speaker:Cape size market opened on Monday, with October contracts at the
Speaker:28,500 and and Q four at
Speaker:27,000, gaining traction later
Speaker:in the day, driven by increased Pacific activity after
Speaker:a dip on Thursday. An aggressive rally on Wednesday
Speaker:pushed October up to 29,750
Speaker:in Q four to 27,800.
Speaker:We also saw Friday started strong, but sellers took
Speaker:control by the evening, with October closing at
Speaker:29,500 and Q four at
Speaker:27,950. So far
Speaker:this week we saw October pushed
Speaker:up to 30,000 at the close last night and
Speaker:Q four actually flat at
Speaker:27,950. Panamax has
Speaker:followed a similar pattern last week. Monday saw low
Speaker:liquidity, and despite some early softness it
Speaker:ended flat with October at 13,550
Speaker:and Q four at
Speaker:13,750. Strong demand midweek, especially
Speaker:in the Atlantic. Routes lift in October rates to
Speaker:14,250. However, the momentum
Speaker:faded and by Friday October closed at
Speaker:38 with Q four at 39
Speaker:and coming into this week so far the rates has
Speaker:actually continued to push up, with October closing
Speaker:at 14 three last night and Q four
Speaker:at 14 250. The supermax has also saw
Speaker:gains despite a quieter end to the week. Last week,
Speaker:Monday opened sluggish, with October and Q four traded down
Speaker:to 14 one and 13 five respectively.
Speaker:Bid support grew as the week progressed,
Speaker:with October hitting 49 and Q four reaching
Speaker:14 six by Wednesday. Early Thursday. Buying
Speaker:supported by optimism on the last larger vessels
Speaker:pushed October to weekly high of
Speaker:15,225. However, the
Speaker:market came under pressure post index and softened,
Speaker:closing Friday with October 14 8th and Q four
Speaker:at 14 six. So far this week.
Speaker:Rates bounced back, with October closing at 15
Speaker:three last night and Q four at 14
Speaker:nine. So it sounds like it was a positive week across the
Speaker:board. There was some uncertainty whether these higher prices could be
Speaker:maintained towards the end of the week, but it seems so far this
Speaker:week like they've been doing pretty well. That's something to keep an eye
Speaker:on. Could you please fill me in on what's been happening during that same
Speaker:period in the physical last week marked one. Of the busiest
Speaker:periods in the dry FFA market as more participants
Speaker:returning to trading a total of around
Speaker:67,860 lots were
Speaker:traded, with capesize and Panamax contracts attracting
Speaker:the most interest, averaging 51 00
Speaker:74,840 lots
Speaker:per day respectively. Supermax gained
Speaker:traction, averaging 1600 lots
Speaker:daily, while handici saw lower activities
Speaker:at just 100 lots per day. The options
Speaker:market was quieter, recording
Speaker:630 lots for Cape size and
Speaker:1320 lots for Panamaxes.
Speaker:Open interest continued to rise alongside
Speaker:steady future prices, suggesting a bullish market
Speaker:outlook. And on the voyage route, the c five
Speaker:West Australia to China route saw increased
Speaker:activities with 6.58 million tonnes
Speaker:traded on the prompt month September to November
Speaker:contracts. Thank you very much Ben, we appreciate that.
Speaker:Thank you Jess, have a lovely day.
Speaker:Next we have Hao Pei, senior analyst from our Shanghai office who is
Speaker:back to talk to us about iron ore. Given this significant
Speaker:PBOC stimulus package, I'm sure we have an interesting segment from you
Speaker:today. Hi hal. Hi
Speaker:Jaz. So my first question
Speaker:is there was a hike in iron ore prices on Tuesday.
Speaker:So could you tell me a little bit about what happened there.
Speaker:Exactly previously, like the whole market was very bearish
Speaker:about iron ore and everything else, every
Speaker:commodities, but there is a sudden hike for iron
Speaker:on Tuesday and Wednesday. So that's because the biggest
Speaker:news of the China are cut by
Speaker:50 bps. So which lead of
Speaker:sentiment of entire commodities sector
Speaker:and the market was expecting a five to
Speaker:ten basis points drop. But
Speaker:however it came out like 50 basis points,
Speaker:which was way more than expectation. And
Speaker:following this cut, there was also a cut on seven day ripple
Speaker:and down payment on second home buying and mortgage rate down
Speaker:on first home buying as well. And standing on the timestamp
Speaker:of a global interest cut after monetary tight for four
Speaker:years. The growth is predictable. However, no guarantee on
Speaker:the weather. This should sustain that should be sustainable.
Speaker:So that's why we see a slight drop from the top of
Speaker:iron ore when it's. When it was 98
Speaker:for the October contract and it's dropped by $2
Speaker:to 96 by closing. But I think
Speaker:one thing for sure is the volatility is growing for iron ore
Speaker:during this week. So was there any fundamental change
Speaker:in the market apart from this macro news?
Speaker:An iron ore market saw improving pit iron
Speaker:usage in China. I think that's the biggest fundamental
Speaker:change for the market. The pig iron
Speaker:production level was decreasing and decreasing through
Speaker:July and August and even early September. But now
Speaker:it's slightly improving from mid September. And
Speaker:although the growth was slower than past year during the same period
Speaker:of time. But I think it is better than early
Speaker:September. At least some eastern China mules started to
Speaker:increase price during the bearish market
Speaker:from late last week. And iron ore
Speaker:physical buyers were also targeting some specific levels
Speaker:to affirm the price up. Like for example
Speaker:88.4 for pbfs. We've
Speaker:been seeing like more than five ligands during the past
Speaker:five weeks. So I think political buyers have a
Speaker:sense that the iron ore will grow up well. In
Speaker:other words, the iron ore is standing
Speaker:upon such levels. And for physical coke in China,
Speaker:there were two rounds of rebound already and
Speaker:fob coking coal from Australia saw tight
Speaker:supply in the lake as well. I think in
Speaker:general the demands and supply relation in ferrous market
Speaker:were recovered during the past month after a huge
Speaker:price drop. And then iron ore and coking coal
Speaker:valuation became slightly low after the drop
Speaker:and there is demand to recover this lower
Speaker:valuation right now.
Speaker:Thank you very much, Hal. Thank you,
Speaker:Jess.
Speaker:And now let's talk about fuel oil with Archie Smith. Hi Archie. Hello.
Speaker:It's good to be back. Yeah, it's been, been a long couple of months.
Speaker:I think people need their fuel oil. News 100% they do. So
Speaker:crude has been super choppy. Why has it been down and now
Speaker:coming back up? So if I talk sort of from
Speaker:September, we sort of beginning of the month, we were really, really
Speaker:coming off hit lows of like 68, 68 on
Speaker:the front. November future. This was spurred
Speaker:by sort of general economic woes
Speaker:globally, particularly in China. You know sort of chinese and us
Speaker:economies very much drive the crude price. So when theres weak data out of
Speaker:those guys we often see it affect crude prices.
Speaker:Chinas been pretty consistently poor out the back end of
Speaker:the pandemic seems like theyve struggled to
Speaker:fully recover. So yeah there was lows there. Market
Speaker:also completely brushed off the fact that OPEC had decided to pull
Speaker:back their, basically they were going to start
Speaker:trickling supply back into the market from October. They've pulled this
Speaker:back two months, market completely brushed it off and continued
Speaker:to really come off. But then the last
Speaker:week or so it did find a bottom and
Speaker:then support has definitely been found with chinese government
Speaker:introducing some sort of schemes and methods to try and
Speaker:boost their economy. As well as this you've got some short term
Speaker:supply support coming from storms in the US Gulf. A lot of the
Speaker:oil majors, your BP, your shells, they've closed down operations
Speaker:and pulled a lot of offshore workers, evacuated them if you
Speaker:will, because there was already one storm and I've heard there's another
Speaker:storm inbound. So that's offering a little bit of short term support.
Speaker:And another thing you've really got to sort of
Speaker:question is the tensions in the Middle east. Obviously that's all been re sparked
Speaker:again. As it is there is no real kind of
Speaker:threat to physical oil supply because none of the nations who are directly
Speaker:involved, your lebanons, your Israels, are sort of large oil
Speaker:supplying nations. But obviously if you look at the surrounding areas, all it takes is
Speaker:some sort of involvement for a more major power and physical supply could
Speaker:really be in trouble. So I think, yeah, the market's definitely looking at that as
Speaker:well. How about the low high sulfur
Speaker:oils? Have they shared the same kind of volatility? Yeah, fuel has been absolutely
Speaker:crazy. I do have some numbers written down on my sheets of where things last
Speaker:traded, but I'm sure in the five minutes it's taken for me to leave my
Speaker:desk and come over here, they'll be very, very different numbers. High sulfur east west,
Speaker:which is the difference between the high sulfur in Singapore
Speaker:against Europe that is now trading deep into the negative territory. It's
Speaker:trading actually at like minus ten in the front month, which means that
Speaker:the european high sulfur grade is at a $10 premium to
Speaker:the Singapore. Fundamentally we're not hearing much other than
Speaker:there's supposedly been quite a shortfall
Speaker:of vessel arrivals in north northern Europe. So
Speaker:that's why the european stuff is kind of holding a bit stronger against the Singapore
Speaker:poor stuff. But I think a lot of it as well is sort of
Speaker:paper marketplace. And I mean, when we were tumbling yesterday down to like minus
Speaker:ten levels, I think a lot of it was stop outs as well, which kind
Speaker:of snowballed the drop. And then looking at
Speaker:the low sulfur, it's really kind of been a roller coaster at the minute. We
Speaker:are coming back down off of highs. I think a lot of it
Speaker:is profit taking, particularly front spreads, front cracks. But I think another thing
Speaker:to consider as well is at this time of the month, you do get a
Speaker:lot of guys who have long positions in the front month
Speaker:now starting to roll. We've seen that today. A lot of selling in the
Speaker:Oknov Singh 0.5 spread, a lot of selling in the Oknov euro
Speaker:spread. And as I said, that's just kind of oil majors, big shippers, etcetera, etcetera,
Speaker:producers who are rolling their opposition into the Nov at
Speaker:this time of the month. And at such high levels, it's a good opportunity for
Speaker:them to do so. So with so much selling interest, it's really sort of smashed
Speaker:the market down. But who knows, the next five minutes you might shoot back up
Speaker:again. It's all over the place. All right, well, thank you very much for that,
Speaker:Archie. I think I'm going to have to leave you to run back to your
Speaker:desk at sounds. I. Yeah, no worries, no worries. It's
Speaker:good to be back. It's good to have you back. And that's it for this
Speaker:week. Make sure to subscribe by clicking the subscribe button on wherever you get your
Speaker:podcast. Also make sure to follow us on LinkedIn or get signed up to our
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Speaker:FIS. Thanks again for joining us and see you in two weeks time on
Speaker:FIS's Freight and quantity podcast. Freight up, freight
Speaker:up.