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.
This podcast uses the following third-party services for analysis:
Podder - https://www.podderapp.com/privacy-policy
00:00:04
Hello and welcome back to freight up, the freight and quantity podcast of freight
00:00:08
investor services. My name is Jess and together with Davide, we will be your
00:00:11
hosts as we navigate our major freight and bulk commodity markets. We are back
00:00:15
after our summer break and quite a lot has happened since you last heard from
00:00:18
us. Hello from me as well. I hope that you really had a nice and
00:00:22
relaxing summer. So let's see what we have on the menu today.
00:00:26
We have our regular update on drive freight with Ben Clang. How
00:00:30
pay a resident from Shanghai will tell us more about the iron ore
00:00:33
market and then we'll end up with Archie's meat, who will give us the
00:00:37
latest take on fuel oil. But as usual, if you still remember how
00:00:41
we used to do things, let's first take a look at the latest news and
00:00:44
the index movements over the last two weeks.
00:00:49
In the UK, the unemployment rate fell to 4.1%
00:00:53
from May to July, down from 4.2% in the previous three
00:00:57
month period. Aligning with market expectations, the british economy
00:01:01
stalled again in July 2024, mirroring June's performance
00:01:05
below market forecasts that we're expecting a
00:01:07
0.2% increase. The bank of England keeps rates
00:01:11
unchanged at 5%. In the US, the core inflation rose
00:01:15
by 0.3%, slightly above forecasts of a
00:01:18
0.2% increase, while the annual rate stood at an
00:01:21
over three year low of 3.2% in August,
00:01:25
matching July's figure. The Fed also decreased the target range for
00:01:29
the Fed fund rate by 50 basis points to
00:01:32
4.75% to 5% in September
00:01:36
2024, the first reduction since March of
00:01:39
four years ago. In China,
00:01:43
the industrial production year on year in August rose by
00:01:46
4.5% in August 2024, falling
00:01:50
short of mackere forecast of 4.8% and slowing
00:01:54
from a 5.1% increase in July. Looking at retail
00:01:57
sales, they grew by 2.1% year on year, down
00:02:01
from the 2.7% growth of July, and
00:02:05
they've missed market consensus at 2.5%. The
00:02:09
People's bank of China also cut its short term interest rate by ten
00:02:13
basis points. In Japan, the annual inflation
00:02:16
rate rose to 3.0% in August
00:02:20
from 2.8% in the prior three months, pointing to the
00:02:24
highest level since October 2023. However,
00:02:27
the bank of Japan kept its short term interest rate at around
00:02:31
0.25% in September. This is the highest since
00:02:35
2008, and this was in line with the market
00:02:38
consensus. Now let's have a look at the
00:02:42
market movements of the last two weeks
00:02:45
on the Capes front, the C five TC had a
00:02:49
dipless tweak and the Hindex hit
00:02:52
$25 on Tuesday, the
00:02:55
17 September, coming back to
00:02:57
$27 yesterday, regaining
00:03:01
some of the lost ground. When it comes to Panamaxes, the index
00:03:04
had been rising for the past two weeks. The P five
00:03:08
TC is up and it was. In fact it was at
00:03:11
$11 on the 10 September and
00:03:15
has gained $2, hitting
00:03:17
$14 yesterday. On the
00:03:21
s ten TC there have been also some positive
00:03:24
news, but somehow it moved less and it went
00:03:28
from the $13 of two weeks
00:03:32
ago to the $14 off
00:03:35
Tuesday, the 23 September. Smaller ships have been also
00:03:39
hovering below the $13 mark. The
00:03:43
HS 70 C went from
00:03:45
$12 of the 10 September to
00:03:49
the $12 of the 23rd.
00:03:53
Iron ore status gained $1.30
00:03:57
in the week between the 10th and the 23 September and it went up
00:04:01
to $94.60 yesterday.
00:04:06
And now let's talk about drive freight with Ben Klang. Hi Ben.
00:04:10
Hello. How are you, Jess? Not too bad. I'm glad to be back. It's
00:04:14
good to have you back on the podcast as well. Yes, likewise. It's nice
00:04:17
that the routines are coming back. Exactly. Especially now when it's
00:04:21
so busy on the market. Exactly. We've got a lot of stuff to talk about,
00:04:25
so could you please walk us through the key movements in the dry freight
00:04:28
FFA market over the past week and how the different vessel
00:04:32
segments performed. All vessel segments posted weekly gains,
00:04:36
though there was fluctuations throughout last week. The
00:04:40
Cape size market opened on Monday, with October contracts at the
00:04:43
28 and and Q four at
00:04:47
27, gaining traction later
00:04:50
in the day, driven by increased Pacific activity after
00:04:54
a dip on Thursday. An aggressive rally on Wednesday
00:04:58
pushed October up to 29
00:05:02
in Q four to 27.
00:05:06
We also saw Friday started strong, but sellers took
00:05:09
control by the evening, with October closing at
00:05:13
29 and Q four at
00:05:16
27. So far
00:05:20
this week we saw October pushed
00:05:23
up to 30 at the close last night and
00:05:27
Q four actually flat at
00:05:30
27. Panamax has
00:05:34
followed a similar pattern last week. Monday saw low
00:05:38
liquidity, and despite some early softness it
00:05:42
ended flat with October at 13
00:05:45
and Q four at
00:05:48
13. Strong demand midweek, especially
00:05:52
in the Atlantic. Routes lift in October rates to
00:05:55
14. However, the momentum
00:05:59
faded and by Friday October closed at
00:06:02
38 with Q four at 39
00:06:05
and coming into this week so far the rates has
00:06:09
actually continued to push up, with October closing
00:06:13
at 14 three last night and Q four
00:06:16
at 14 250. The supermax has also saw
00:06:20
gains despite a quieter end to the week. Last week,
00:06:24
Monday opened sluggish, with October and Q four traded down
00:06:28
to 14 one and 13 five respectively.
00:06:32
Bid support grew as the week progressed,
00:06:35
with October hitting 49 and Q four reaching
00:06:39
14 six by Wednesday. Early Thursday. Buying
00:06:43
supported by optimism on the last larger vessels
00:06:46
pushed October to weekly high of
00:06:49
15. However, the
00:06:53
market came under pressure post index and softened,
00:06:56
closing Friday with October 14 8th and Q four
00:07:00
at 14 six. So far this week.
00:07:04
Rates bounced back, with October closing at 15
00:07:07
three last night and Q four at 14
00:07:11
nine. So it sounds like it was a positive week across the
00:07:14
board. There was some uncertainty whether these higher prices could be
00:07:18
maintained towards the end of the week, but it seems so far this
00:07:22
week like they've been doing pretty well. That's something to keep an eye
00:07:25
on. Could you please fill me in on what's been happening during that same
00:07:29
period in the physical last week marked one. Of the busiest
00:07:33
periods in the dry FFA market as more participants
00:07:36
returning to trading a total of around
00:07:40
67 lots were
00:07:44
traded, with capesize and Panamax contracts attracting
00:07:48
the most interest, averaging 51 00
00:07:51
74 lots
00:07:55
per day respectively. Supermax gained
00:07:59
traction, averaging 1600 lots
00:08:02
daily, while handici saw lower activities
00:08:06
at just 100 lots per day. The options
00:08:10
market was quieter, recording
00:08:13
630 lots for Cape size and
00:08:16
1320 lots for Panamaxes.
00:08:20
Open interest continued to rise alongside
00:08:24
steady future prices, suggesting a bullish market
00:08:28
outlook. And on the voyage route, the c five
00:08:31
West Australia to China route saw increased
00:08:35
activities with 6.58 million tonnes
00:08:39
traded on the prompt month September to November
00:08:42
contracts. Thank you very much Ben, we appreciate that.
00:08:46
Thank you Jess, have a lovely day.
00:08:52
Next we have Hao Pei, senior analyst from our Shanghai office who is
00:08:55
back to talk to us about iron ore. Given this significant
00:08:59
PBOC stimulus package, I'm sure we have an interesting segment from you
00:09:03
today. Hi hal. Hi
00:09:06
Jaz. So my first question
00:09:10
is there was a hike in iron ore prices on Tuesday.
00:09:14
So could you tell me a little bit about what happened there.
00:09:19
Exactly previously, like the whole market was very bearish
00:09:23
about iron ore and everything else, every
00:09:26
commodities, but there is a sudden hike for iron
00:09:30
on Tuesday and Wednesday. So that's because the biggest
00:09:34
news of the China are cut by
00:09:37
50 bps. So which lead of
00:09:41
sentiment of entire commodities sector
00:09:45
and the market was expecting a five to
00:09:48
ten basis points drop. But
00:09:51
however it came out like 50 basis points,
00:09:55
which was way more than expectation. And
00:09:59
following this cut, there was also a cut on seven day ripple
00:10:03
and down payment on second home buying and mortgage rate down
00:10:06
on first home buying as well. And standing on the timestamp
00:10:10
of a global interest cut after monetary tight for four
00:10:14
years. The growth is predictable. However, no guarantee on
00:10:17
the weather. This should sustain that should be sustainable.
00:10:21
So that's why we see a slight drop from the top of
00:10:25
iron ore when it's. When it was 98
00:10:29
for the October contract and it's dropped by $2
00:10:33
to 96 by closing. But I think
00:10:36
one thing for sure is the volatility is growing for iron ore
00:10:40
during this week. So was there any fundamental change
00:10:43
in the market apart from this macro news?
00:10:48
An iron ore market saw improving pit iron
00:10:52
usage in China. I think that's the biggest fundamental
00:10:55
change for the market. The pig iron
00:10:59
production level was decreasing and decreasing through
00:11:03
July and August and even early September. But now
00:11:06
it's slightly improving from mid September. And
00:11:10
although the growth was slower than past year during the same period
00:11:14
of time. But I think it is better than early
00:11:17
September. At least some eastern China mules started to
00:11:21
increase price during the bearish market
00:11:24
from late last week. And iron ore
00:11:28
physical buyers were also targeting some specific levels
00:11:32
to affirm the price up. Like for example
00:11:36
88.4 for pbfs. We've
00:11:39
been seeing like more than five ligands during the past
00:11:43
five weeks. So I think political buyers have a
00:11:47
sense that the iron ore will grow up well. In
00:11:51
other words, the iron ore is standing
00:11:54
upon such levels. And for physical coke in China,
00:11:58
there were two rounds of rebound already and
00:12:02
fob coking coal from Australia saw tight
00:12:05
supply in the lake as well. I think in
00:12:09
general the demands and supply relation in ferrous market
00:12:12
were recovered during the past month after a huge
00:12:16
price drop. And then iron ore and coking coal
00:12:20
valuation became slightly low after the drop
00:12:24
and there is demand to recover this lower
00:12:27
valuation right now.
00:12:31
Thank you very much, Hal. Thank you,
00:12:35
Jess.
00:12:41
And now let's talk about fuel oil with Archie Smith. Hi Archie. Hello.
00:12:45
It's good to be back. Yeah, it's been, been a long couple of months.
00:12:50
I think people need their fuel oil. News 100% they do. So
00:12:53
crude has been super choppy. Why has it been down and now
00:12:57
coming back up? So if I talk sort of from
00:13:00
September, we sort of beginning of the month, we were really, really
00:13:04
coming off hit lows of like 68, 68 on
00:13:08
the front. November future. This was spurred
00:13:11
by sort of general economic woes
00:13:15
globally, particularly in China. You know sort of chinese and us
00:13:19
economies very much drive the crude price. So when theres weak data out of
00:13:22
those guys we often see it affect crude prices.
00:13:26
Chinas been pretty consistently poor out the back end of
00:13:29
the pandemic seems like theyve struggled to
00:13:33
fully recover. So yeah there was lows there. Market
00:13:37
also completely brushed off the fact that OPEC had decided to pull
00:13:41
back their, basically they were going to start
00:13:44
trickling supply back into the market from October. They've pulled this
00:13:48
back two months, market completely brushed it off and continued
00:13:51
to really come off. But then the last
00:13:55
week or so it did find a bottom and
00:13:58
then support has definitely been found with chinese government
00:14:02
introducing some sort of schemes and methods to try and
00:14:06
boost their economy. As well as this you've got some short term
00:14:10
supply support coming from storms in the US Gulf. A lot of the
00:14:14
oil majors, your BP, your shells, they've closed down operations
00:14:17
and pulled a lot of offshore workers, evacuated them if you
00:14:21
will, because there was already one storm and I've heard there's another
00:14:25
storm inbound. So that's offering a little bit of short term support.
00:14:28
And another thing you've really got to sort of
00:14:32
question is the tensions in the Middle east. Obviously that's all been re sparked
00:14:36
again. As it is there is no real kind of
00:14:40
threat to physical oil supply because none of the nations who are directly
00:14:44
involved, your lebanons, your Israels, are sort of large oil
00:14:48
supplying nations. But obviously if you look at the surrounding areas, all it takes is
00:14:51
some sort of involvement for a more major power and physical supply could
00:14:55
really be in trouble. So I think, yeah, the market's definitely looking at that as
00:14:58
well. How about the low high sulfur
00:15:01
oils? Have they shared the same kind of volatility? Yeah, fuel has been absolutely
00:15:05
crazy. I do have some numbers written down on my sheets of where things last
00:15:09
traded, but I'm sure in the five minutes it's taken for me to leave my
00:15:12
desk and come over here, they'll be very, very different numbers. High sulfur east west,
00:15:16
which is the difference between the high sulfur in Singapore
00:15:19
against Europe that is now trading deep into the negative territory. It's
00:15:23
trading actually at like minus ten in the front month, which means that
00:15:26
the european high sulfur grade is at a $10 premium to
00:15:30
the Singapore. Fundamentally we're not hearing much other than
00:15:34
there's supposedly been quite a shortfall
00:15:38
of vessel arrivals in north northern Europe. So
00:15:42
that's why the european stuff is kind of holding a bit stronger against the Singapore
00:15:45
poor stuff. But I think a lot of it as well is sort of
00:15:49
paper marketplace. And I mean, when we were tumbling yesterday down to like minus
00:15:53
ten levels, I think a lot of it was stop outs as well, which kind
00:15:56
of snowballed the drop. And then looking at
00:16:00
the low sulfur, it's really kind of been a roller coaster at the minute. We
00:16:04
are coming back down off of highs. I think a lot of it
00:16:08
is profit taking, particularly front spreads, front cracks. But I think another thing
00:16:12
to consider as well is at this time of the month, you do get a
00:16:14
lot of guys who have long positions in the front month
00:16:18
now starting to roll. We've seen that today. A lot of selling in the
00:16:22
Oknov Singh 0.5 spread, a lot of selling in the Oknov euro
00:16:25
spread. And as I said, that's just kind of oil majors, big shippers, etcetera, etcetera,
00:16:29
producers who are rolling their opposition into the Nov at
00:16:33
this time of the month. And at such high levels, it's a good opportunity for
00:16:36
them to do so. So with so much selling interest, it's really sort of smashed
00:16:40
the market down. But who knows, the next five minutes you might shoot back up
00:16:44
again. It's all over the place. All right, well, thank you very much for that,
00:16:47
Archie. I think I'm going to have to leave you to run back to your
00:16:50
desk at sounds. I. Yeah, no worries, no worries. It's
00:16:53
good to be back. It's good to have you back. And that's it for this
00:16:57
week. Make sure to subscribe by clicking the subscribe button on wherever you get your
00:17:00
podcast. Also make sure to follow us on LinkedIn or get signed up to our
00:17:04
app FIS live to make sure you never miss any freight and commodity analysis from
00:17:08
FIS. Thanks again for joining us and see you in two weeks time on
00:17:12
FIS's Freight and quantity podcast. Freight up, freight
00:17:16
up.
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