Riding that freight rollercoaster once more with updates on the Cape, Panamaxes and Iron Ore!
Welcome back to "Freight Up!", the podcast from Freight Investor Services that brings you all the latest news and insights from the world of freight and logistics.
In today's episode, we’re discussing the significant fall in price and aggressive moves that are shaking the industry.
Joining us on the show are our industry experts Kerry Deal, Hao Pei, James Robinson, and Archie Smith, providing their unique perspectives on the current market landscape.
We discuss the increase in volumes and short covering, as well as the impact of liquidating positions and the implications of waiting for the market to calm down.
Listen in as we analyze the rise in interest and liquidity in specific contracts, such as cal 24 25 and 25 26, and delve into the intricate world of cal spreads.
We also examine the influence of iron ore market volatility and its correlation with the macro market. Plus, we explore the factors driving the recovery of Australian thermal coal exports to China and the implications for rates.
All this and more on today's episode of "Freight Up!"
Crude oil prices surpass resistance levels due to positive economic outlook and low Chinese imports
Archie discusses the recent surge in crude oil prices, which has seen prices surpass resistance levels. The primary reason for this upward momentum is a positive economic outlook and lower-than-expected crude oil imports from China.
Firstly, the positive economic outlook plays a significant role in driving crude oil prices higher. The Energy Information Administration (EIA) released a report that increased GDP growth predictions and Brent price forecasts. This positive news has created optimism in the market, leading to increased demand for crude oil and thus higher prices.
Secondly, the decline in Chinese crude oil imports has further contributed to the rally in crude oil prices. In June, Chinese imports of crude oil were weak, indicating reduced demand. This has raised concerns in the market about overall global demand for crude oil. However, despite this negative factor, the rally in crude oil prices suggests that the positive economic outlook and other factors outweigh the impact of lower Chinese imports.
It's important to note that alongside these positive factors, there are also downward pressures on crude oil prices. For example, the weak Chinese crude oil imports in June suggest a potential slowdown in economic activity. Additionally, a stronger dollar can weigh down on the price of crude oil, as it makes it more expensive for countries with other currencies to purchase oil.
Overall, the current situation in the crude oil market can be described as a pendulum, swinging between demand concerns and positive economic outlooks. The rally in crude oil prices due to surpassing resistance levels indicates a strong market sentiment. However, it remains to be seen how long this upward momentum can be sustained and whether other factors, such as Chinese imports and the strength of the dollar, will impact prices in the future.
Market concerns rise as China's Country Garden misses bond payments due to liquidity stress
Market concerns arising from China's Country Garden missing bond payments? This situation has caused liquidity stress and raised questions about the overall stability of the market.
Country Garden, one of China's prominent house developers, failed to make bond payments, amounting to $22.5 million.
The company claims that it is a short-term liquidity issue and plans to pay the coupons within 30 days. However, the market remains skeptical.
Listen to learn why.
Here's the link to the FIS live app
Timestamped summary of this episode:
00:00:44 Crude oil prices surpass resistance levels due to positive economic outlook and low Chinese imports.
00:03:29 Fuel oil market softens, cracks weaken.
00:07:08 Deflation could worsen consumer woes in China.
00:13:34 Market volatility, quiet periods, iron ore spike.
00:14:48 Market concerns rise as China's Country Garden misses bond payments due to liquidity stress. Correction likely due to crowded position and external factors impacting construction projects.
00:17:42 Optimized supply, balanced demand, correlation with commodities.
00:23:26 Panamaxes performing well, rates climbing steadily. Active market, supported rates, growing demand.
00:24:31 Paper slowly increases with doubts on capes.
Want a summary in French?
Dans cet épisode de Freight Up, nous discutons des dernières tendances et mouvements sur le marché du fret. Nous constatons une forte baisse des prix et une agressivité croissante sur le marché. Cette situation a entraîné une augmentation des volumes et des couvertures à court terme. Certains acteurs du marché liquident leurs positions et attendent que le marché se calme avant de prendre de nouvelles décisions. Nous observons également une augmentation significative de l'intérêt et de la liquidité dans les échéances cal 24 25 et 25 26, ainsi que dans les contrats à terme cal 25. Les spreads sur le bétail se négocient jusqu'à dix KT par mois. Nous constatons un intérêt vendeur sur les spreads de première ligne, en particulier sur les échéances d'août, septembre et octobre. Il y a également une augmentation de la liquidité en fin de courbe, notamment sur les contrats cal 25 26 et cal 24 25. La forte volatilité sur le marché du minerai de fer suscite un intérêt pour les échéances à plus long terme, mais cet intérêt diminue généralement lorsque le marché se stabilise. La structure de l'offre de minerai de fer a été optimisée avec davantage d'importations de basse qualité et de rabais. Les marges de la sidérurgie sont à leur plus haut niveau de l'année, ce qui indique un marché sain. La correction du marché devrait ralentir et entrer dans une période plate en raison d'une offre et d'une demande équilibrées. Le marché macroéconomique est étroitement lié au marché des matières premières et la corrélation devrait augmenter en 2023. La récente correction est influencée par l'attente de changements industriels et d'un soutien politique. Les traders et les parties prenantes doivent prendre en compte la vue macroéconomique avant d'analyser les fondamentaux et les aspects techniques du marché. Il est important d'étudier et de comprendre les marchés pertinents, les stratégies, les politiques et les actualités mondiales. Les exportations australiennes de charbon thermique vers la Chine se sont bien redressées, avec des capesizes bénéficiant le plus. Les volumes mensuels de charbon thermal australien transportés sur les capes sont passés de 5,9 millions de tonnes au T1 à 9,1 millions de tonnes en juillet. Les tarifs de transport du charbon doivent encore augmenter. Les volumes de fret plus sains en provenance du Brésil ont affecté la liste des tonnages. Le sentiment général reste baissier, notamment avec le retour de la Chine à la déflation. Le marché peut être volatil tout au long de l'année, semblable à une montagne russe. Août est traditionnellement une période calme avec moins de demande et d'offre dans le secteur de la construction en raison des conditions météorologiques extrêmes. Il y a eu une forte hausse des prix du minerai de fer en juillet et juin, suivie d'une correction de plus de 10%. Le marché devrait se calmer après ces mouvements importants. L'indice des prix à la consommation a baissé de 0,3%, la première baisse depuis 2020. Dans une période de déflation, les consommateurs ont tendance à réduire leurs dépenses en prévision de prix plus bas, ce qui entraîne une diminution de la production. Les problèmes dans le secteur immobilier pourraient aggraver les problèmes associés à la déflation, car la baisse des prix des logements donne aux gens l'impression d'être matériellement plus pauvres et les incite à réduire encore leurs dépenses. Le chômage des jeunes est élevé (21%) et commence à affecter les données. Les données d'importation et d'exportation en Chine sont en nette baisse, suggérant une demande des consommateurs réduite et impactant spécifiquement l'industrie du minerai de fer. Country Garden, un grand promoteur immobilier en Chine, a manqué 22,5 millions de dollars de paiements d'obligations, ce qui suscite des inquiétudes sur le marché. Country Garden affirme qu'il ne s'agit que d'une question de liquidité à court terme et prévoit de payer les coupons dans les 30 jours. Le marché reste sceptique et continue de subir une correction. Cette correction est également attribuée à une position encombrée à la fois sur FGX et DCE, ce qui suggère une spéculation excessive par des joueurs. Des facteurs tels que les restrictions de production en juillet, le contrôle de la production pour H2 2023, une saison légère en août et des conditions météorologiques défavorables en Asie ont tous contribué à la baisse des performances dans le complexe ferreux. Cela a entraîné moins de travaux sur les chantiers de construction et une efficacité réduite dans les projets d'infrastructure. La structure du marché du fioul s'est assouplie par rapport à la semaine dernière. La semaine dernière, il y a eu des rallyes fous sur les écarts de soufre faible, avec le mois de première ligne négociant à un écart de 12,50 $. Cette semaine, l'écart s'est assoupli progressivement pour atteindre environ 10,50 $. Les écarts de synchronisation .5 se sont ralliés la semaine dernière, atteignant 13 $, mais se situent maintenant entre neuf et dix. Il n'y a pas eu de changements majeurs dans l'écart depuis la semaine dernière, juste un léger affaiblissement par rapport aux niveaux les plus élevés. Aujourd'hui, c'est un jour férié, ce qui réduit la liquidité du marché. Les prix du pétrole brut ont dépassé un niveau de résistance de 86,60 $, le plus haut depuis mi-avril, montrant ainsi une forte hausse. Un niveau de résistance important de 86,73 $ a été franchi, renforçant la poussée des prix du pétrole brut. Cette hausse peut être alimentée par des nouvelles positives du rapport de l'EIA, qui a augmenté les prévisions de croissance du PIB et les prévisions de prix du Brent. Cependant, il existe des pressions à la baisse, telles que les importations de pétrole brut en Chine faibles en juin et un dollar plus fort. La situation actuelle est décrite comme un pendule oscillant entre les craintes liées à la demande et les préoccupations liées à l'offre. Je continue de croire que les fondamentaux du marché ne sont pas suffisamment solides pour pousser le marché significativement à la hausse. L'indice Baltic Exchange Cape Five TC était de 14 379 le 26 juillet et se situe actuellement à 14 526, indiquant un soutien constant à ces niveaux mais pas de rupture. Je souligne les aspects positifs du marché, en indiquant que les importations chinoises de charbon, de minerai de fer et de soja ont totalisé 142,5 millions de tonnes, soit une baisse par rapport à juin à juillet mais une augmentation d'une année sur l'autre. Les Panamax ont connu une bonne période récemment, avec la moyenne des cinq TC baltiques revenant en territoire à cinq chiffres. La région de l'Atlantique Nord a été particulièrement active et ensoleillée, ce qui a entraîné une demande accrue et des tarifs plus élevés. La demande de transport en vrac a été légèrement inférieure mais en croissance. Les préoccupations concernant la liste des tonnages sur le continent persistent, mais les tarifs semblent soutenus à ces niveaux et pourraient encore augmenter. La route de la côte est de l'Amérique du Sud est devenue plus active, ce qui se traduit par des tarifs supérieurs à 12 000 $ pour la route P Six. La région du Pacifique s'améliore également, avec aucune rondachine fixant des tarifs compris entre 8509 et 9500 dollars par jour. Les demandes de rondachine ont considérablement augmenté, ce qui indique un marché sain et soutenu.
Want a summary in Spanish?
En este episodio de Freight Up, se discute una caída significativa en el precio y un movimiento agresivo en el mercado. Ha habido un aumento en los volúmenes y cobertura de cortos debido a este movimiento agresivo. Algunas personas están liquidando sus posiciones y esperando a que el mercado se calme antes de hacer otro movimiento. Se ha observado un aumento significativo en el interés y liquidez en las tenencias de cal 24 25 y 25 26, así como en las tenencias de cal 25 inmediatas. Los spreads de ganado se han negociado hasta diez KT al mes. Se ha observado interés de venta en los spreads de frente, especialmente en los tenedores de Agosto, Septiembre y Organización. También se ha observado un aumento de liquidez en la parte posterior de la curva, especialmente en cal 25 26 y cal 24 25. La alta volatilidad en el mercado del mineral de hierro genera interés en los tenedores posteriores, que tiende a disminuir una vez que el mercado se estabiliza. La estructura de suministro de mineral de hierro se ha optimizado, con más importaciones de baja calidad y descuento. Los márgenes de acero están en su máximo anual, lo que indica un mercado saludable. Se espera que la corrección del mercado se ralentice y entre en un período de estabilidad debido a un equilibrio entre la oferta y la demanda. El mercado macro tiene una conexión estrecha con el mercado de materias primas y se espera que la correlación aumente en 2023. La corrección reciente ha sido influenciada por inversores que esperan cambios industriales y apoyo político. Los comerciantes y las partes interesadas deben considerar la visión macro antes de analizar los fundamentos del mercado y los aspectos técnicos. Es importante estudiar y comprender los mercados relevantes, las estrategias, las políticas y las noticias globales. Las exportaciones australianas de carbón térmico a China se han recuperado bien, especialmente en las embarcaciones Cape. Los volúmenes mensuales de carbón térmico australiano transportados en los Cape han aumentado de 5.9 millones de toneladas en el primer trimestre a 9.1 millones de toneladas en julio. Se espera que los precios del transporte de carbón aumenten aún más. El sentimiento general sigue siendo bajista, especialmente con China volviendo a la deflación. Country Garden, un gran desarrollador de viviendas en China, no ha pagado $ 22.5 millones en bonos a plazo, lo que genera preocupación en el mercado. Country Garden afirma que es solo un problema de liquidez a corto plazo y planea pagar los cupones dentro de los 30 días. Sin embargo, el mercado sigue siendo escéptico y continúa experimentando una corrección. La estructura del mercado del fuel oil se ha suavizado desde la semana pasada. Los precios del petróleo crudo han superado un nivel de resistencia de 86.60, el más alto desde mediados de abril, mostrando un fuerte aumento. El actual rally puede ser impulsado por noticias positivas en el informe de la EIA, que aumentó las previsiones de crecimiento del PIB y los precios del Brent. Sin embargo, existen presiones a la baja, como la débil importación de petróleo crudo en China en junio y un dólar más fuerte. El mercado de los Cape ha estado relativamente bien respaldado y dentro de un rango constante en las últimas semanas. El promedio del TC de los Cape en la Bolsa de Valores Báltica fue de 14,379 el 26 de julio y actualmente está en 14,526, lo que indica un cierto apoyo constante en estos niveles pero sin una gran subida. Se destacan aspectos positivos en el mercado, como las importaciones de carbón, mineral de hierro y soja de China, que sumaron 142.5 millones de toneladas, lo que representa una disminución de junio a julio pero un aumento interanual. Los Panamaxes también han experimentado un buen desempeño últimamente, con un promedio de TC de cinco dígitos. La región del Atlántico Norte ha sido particularmente activa y soleada, lo que ha llevado a un aumento de la demanda y las tarifas. La demanda de viajes de ida ha sido ligeramente más baja pero continúa creciendo. Las preocupaciones sobre la lista de tonelaje en el continente persisten, pero las tarifas parecen respaldadas en los niveles actuales y pueden aumentar aún más. La ruta de la costa este de América del Sur se ha vuelto más activa, lo que ha resultado en tarifas superiores a $ 12,000 para la ruta P Seis. La región del Pacífico también está mejorando, con no pack rounds fijando tarifas entre $ 8509 y $ 9500 por día. La consulta de no pack rounds ha aumentado significativamente, lo que indica un mercado saludable y respaldado.
Want a summary in Malay?
Episode ini membahas tentang penurunan harga yang signifikan dan pergerakan agresif di pasar. Terjadi peningkatan volume dan penutupan posisi pendek akibat pergerakan agresif tersebut. Beberapa orang sedang melikuidasi posisi mereka dan menunggu pasar tenang sebelum melakukan langkah berikutnya. Terjadi peningkatan minat dan likuiditas yang signifikan pada bulan cal 24 25 dan 25 26, serta bulan cal 25 secara umum. Penyebaran sapi telah diperdagangkan hingga sepuluh KT per bulan. Minat penjualan telah teramati pada penyebaran depan, terutama pada tenor Agustus, September, dan Oktober. Likuiditas juga meningkat di bagian belakang kurva, terutama pada cal 25 26 dan cal 24 25. Volatilitas tinggi di pasar bijih besi menyebabkan minat pada tenor belakang, yang biasanya menurun setelah pasar stabil. Struktur pasokan bijih besi telah dioptimalkan, dengan impor grade rendah dan diskon yang lebih banyak. Marjin baja mencapai level tertinggi setahun, menunjukkan pasar yang sehat. Koreksi pasar ini diharapkan akan melambat dan memasuki periode datar karena keseimbangan pasokan dan permintaan. Pasar makro memiliki koneksi yang kuat dengan pasar komoditas, dan korelasi diperkirakan akan meningkat pada tahun 2023. Koreksi terbaru ini dipengaruhi oleh investor yang menunggu perubahan industri dan dukungan kebijakan. Para pedagang dan pemangku kepentingan perlu mempertimbangkan pandangan makro sebelum menganalisis fundamental pasar dan aspek teknis. Penting untuk mempelajari dan memahami pasar-pasar terkait, strategi, kebijakan, dan berita global. Ekspor batu bara termal Australia ke China telah pulih dengan baik, dengan kapal Cape yang menjadi yang paling menguntungkan. Volume bulanan batu bara termal Australia yang diangkut pada Kapal Cape meningkat dari 5,9 juta ton pada Q1 menjadi 9,1 juta ton pada bulan Juli. Tarif pengangkutan batu bara perlu meningkat lebih lanjut. Volume fixing yang lebih baik dari Brazil telah mempengaruhi daftar tonase. Sentimen keseluruhan tetap bearish, terutama dengan China kembali ke deflasi. Saya percaya bahwa pasar dapat mengalami volatilitas sepanjang tahun, seperti rollercoaster. Agustus biasanya adalah periode yang sepi dengan permintaan dan pasokan yang lebih sedikit di industri konstruksi karena kondisi cuaca ekstrem. Periode ini mirip dengan waktu Natal dan liburan di China, di mana biasanya terjadi aktivitas yang lebih sedikit. Terjadi lonjakan signifikan dalam harga bijih besi pada bulan Juli dan Juni, yang kemudian diikuti dengan koreksi lebih dari 10%. Saya mengharapkan pasar akan menjadi lebih tenang setelah pergerakan besar ini. CPI (Consumer Price Index) mengalami penurunan sebesar 0,3%, penurunan pertama sejak 2020. Dalam era deflasi, konsumen cenderung mengurangi pengeluaran mereka karena mengantisipasi harga yang lebih rendah, yang menyebabkan penurunan produksi. Masalah di sektor properti dapat memperburuk masalah yang terkait dengan deflasi, karena penurunan harga rumah membuat orang merasa lebih miskin secara materi dan mendorong mereka untuk melakukan pemotongan pengeluaran lebih lanjut. Tingkat pengangguran pemuda tinggi (21%) dan mulai mempengaruhi data. Data impor dan ekspor di China juga turun signifikan, menunjukkan penurunan permintaan konsumen dan berdampak pada industri bijih besi khususnya. Country Garden, pengembang rumah besar di China, gagal membayar utang obligasi sebesar $22,5 juta, yang menimbulkan kekhawatiran di pasar. Country Garden menyatakan bahwa ini hanya masalah likuiditas sementara dan berencana membayar kupon dalam 30 hari. Namun, pasar tetap skeptis dan terus mengalami koreksi. Koreksi ini juga disebabkan oleh posisi yang ramai baik di FGX maupun DCE, yang menunjukkan spekulasi berlebihan oleh para penjudi. Faktor-faktor seperti pembatasan produksi pada bulan Juli, pengendalian produksi untuk H2 2023, musim ringan pada bulan Agustus, dan kondisi cuaca buruk di Asia semuanya berkontribusi pada penurunan performa kompleks Ferrous. Hal ini mengakibatkan penurunan pekerjaan di lokasi konstruksi dan efisiensi yang lebih rendah dalam proyek-proyek infrastruktur. Struktur pasar untuk bahan bakar minyak telah melemah sejak minggu lalu. Minggu lalu, terjadi kenaikan yang luar biasa dalam perbedaan rendah belerang, dengan bulan depan diperdagangkan dengan perbedaan harga $12,50. Minggu ini, perbedaannya melemah menjadi sekitar $10,50 secara bertahap. Perbedaan sinkronisasi .5 naik secara signifikan minggu lalu, mencapai $13, tetapi sekarang berada di antara sembilan hingga sepuluh. Tidak ada pergeseran besar dalam perbedaan tersebut sejak minggu lalu, hanya melemah sedikit dari tertinggi. Hari ini adalah hari libur, yang mengurangi likuiditas pasar. Harga minyak mentah telah melampaui level resistensi 86,60, yang merupakan level tertinggi sejak pertengahan April, menunjukkan kenaikan yang signifikan. Level resistensi utama 86,73 berhasil ditembus, meningkatkan dorongan pada harga minyak mentah. Kenaikan ini mungkin dipicu oleh berita positif dari laporan EIA, yang meningkatkan perkiraan pertumbuhan GDP dan harga Brent. Namun, tekanan penurunan juga ada, seperti impor minyak mentah China yang lemah pada bulan Juni dan penguatan dolar. Situasi saat ini digambarkan sebagai batang pengukur yang berayun antara kekhawatiran permintaan dan masalah pasokan. Saya menyadari bahwa kami sebelumnya melaporkan berita negatif, tetapi saya menyebutkan bahwa pasar Cape telah cukup baik didukung dan terbatas dalam beberapa minggu terakhir. Saya tetap percaya bahwa fundamental pasar tidak cukup kuat untuk mendorong pasar secara signifikan lebih tinggi. Rata-rata TC Baltic Exchange Cape Lima pada tanggal 26 Juli adalah 14.379 dan saat ini berada di 14.526, menunjukkan dukungan yang konsisten pada level tersebut tetapi belum ada breakout. Saya menyoroti hal-hal positif di pasar, dengan menyebutkan bahwa total impor batu bara, bijih besi, dan kedelai China mencapai 142,5 juta ton, yang merupakan penurunan dari Juni ke Juli tetapi peningkatan secara tahunan. Panamax telah mengalami kinerja yang relatif baik belakangan ini, dengan rata-rata TC Baltic Lima kembali ke kisaran angka lima digit. Wilayah Atlantik Utara khususnya aktif dan cerah, menyebabkan peningkatan permintaan dan tarif yang lebih tinggi. Permintaan haul depan sedikit lebih rendah tetapi tetap meningkat. Kejelasan tentang daftar tonase dari benua masih ada, tetapi tarif tampak didukung pada level saat ini dan mungkin akan naik lebih lanjut. Rute Timur Pantai Amerika Selatan telah menjadi lebih aktif, menghasilkan tarif di atas $12.000 untuk rute P Enam. Wilayah Pasifik juga mengalami peningkatan, tanpa ronde packing trading pada tarif antara $8509 hingga $9500 per hari. Permintaan untuk ronde packing meningkat secara signifikan, menunjukkan pasar yang sehat dan didukung.
Fernanda [00:00:00]:
A well supported Cape market. Panamax is on a good run, a steep correction for iron ore. All this and more on Freight Up. Hello, freight up, listeners. It's Fernanda and I'm back from Romania, where I was playing vampires. This week. The Ferris complex is looking, well, complex, so we're going to be listening to how Pei and James Robinson break down some of that complexity for us. A. Smith Seven, your favorite oil broker, will be here with all of your oil news. And Carrie Deal comes at you with a freight update. All this and more on freight up.
Fernanda [00:00:40]:
There's a lot of news floating around, specifically around crude.
Archie [00:00:44]:
Yeah, well, price wise, before today, we hadn't broken kind of 86 60 level in the future for months. So basically last week there was a bit of a rally we were touching around 86 60. I think that was roughly where the high was. Struggled to break past that. That was kind of quite a firm level of resistance. And those were the highest levels we'd seen since mid April. So quite a substantial amount of time, whereas today we have just surpassed those levels. I'm going to use Ed's numbers here. Brilliant technical analyst Ed Hutton. He gave today in his morning report a primary resistance of 86 73. When I left my desk, we were trading around 86 80. So we've broken his first resistance level there. So, yeah, there's definitely a push in the crude. I think a lot of it is the same news. What's maybe spurred today's rally is EIA data. It wasn't data. Well, it is data, I suppose, but EIA report that came out, which painted the US economic situation in quite a rosy light. They increased their GDP growth prediction to 1.9% for the year, I believe, and they also increased their average Brent price for $2023 to $86, which is a $7 increase from the previous forecast. So both of those are kind of positive outlook fills the market with more confidence and has pushed prices up quite substantially this morning. To add to that, we are still seeing some downward pressure as well. Chinese crude imports have hit some very low levels in June. Yeah. So there is still some downward pressure that could be limiting those gains that we're seeing. Kind of weak outlook for China with crude imports at some low levels for June and a stronger dollar as well. When the dollar FIS stronger, holders of foreign currency have less buying power for oil. And all oil at the moment is traded in dollars. So when the dollar is stronger, we can buy less oil for the same amount of buck, which decreases the price of oil. So those are a couple of downward pressures still there to kind of act as a counterbalance to the rally. I think the situation we're in at the minute is very much a pendulum. It swings one day to, oh, demand worries. There's no demand blah, blah, blah, and then it will swing the next day to, oh, there's no supply price up. It's very to and fro at the minute. It's quite a limbo.
Fernanda [00:03:14]:
Like being in a toxic relationship.
Archie [00:03:16]:
You never know where you stand. Exactly. Yeah. One day you love it, one day you hate it.
Fernanda [00:03:24]:
All freight. So what's going on in the world of fuel oil?
Archie [00:03:29]:
Yeah, fuel oil. The market structure has softened quite a bit from last week. Last week we had a bit of a madness. I can't remember if I spoke about it on last week's podcast, but there were some crazy rallies in the low sulfur cracks. I think it was last Tuesday or last Wednesday. They rallied like $2 in a day, or over $2 in a day, which is seriously substantial for a crack. I think it traded the front month, seeing .5 crack, crack being the it's basically the differential of the crude against the price of the products of the crude. That crack was trading, I think, upwards of $12.50. That softened this week to around $10.50. Kind of gradually. That softened the spreads as well. The sync .5 spreads, they rallied like $5 last week, up to $13 again. We're down kind of between nine and ten. Market's been quite well defined there this week, around that level. Nine bid, ten offers, been trading between there, little bit outside as well, but we've not seen any major shifts in the spread since last week. Just come a little bit weaker from last week's highs. And today, obviously, it's a sing holiday, which has sucked quite a lot of liquidity out of the market.
Fernanda [00:04:42]:
Happy holiday to all of our Singaporean listeners.
Archie [00:04:45]:
100%.
Fernanda [00:04:46]:
Archie loves you.
Archie [00:04:47]:
I do, yeah. But it shows how much of an influence Singapore has on the market and the Asian market in general, because when they're out, it really does just almost come to a halt. Not completely, but a lot of paper planes flying around, a lot of football chat.
Hao Pei [00:05:09]:
Which made a couple of new.
Archie [00:05:10]:
Signings, actually, so that's exciting.
Fernanda [00:05:12]:
Oh, wow. That's why you have a little bit of a pepper in your set today.
Archie [00:05:15]:
Exactly. Anything substantial today? The high sold for East West has been sold off quite a lot. It settled last night at minus $2. It sold down to minus five. So today quite a substantial sell off in the high sulfur East West down $3 to minus five, having settled last night at minus two. And this means that the high sulfur Singapore products is trading at a discount to the high sulfur European products.
Fernanda [00:05:38]:
Why might that be?
Archie [00:05:39]:
Potentially because of the high inflows of high sulfur into the Asian market at the minute. Like I've mentioned past couple of weeks, high demand for feedstock, a lot of power generation demand as well in that region, particularly Middle East. And yeah, there is ample inflows of high sulfur into that region at the minute, which could be putting downward pressure on that price, hence sinking the East West into negative territory.
Fernanda [00:06:03]:
All right, Archie, it's time for the infamous question.
Archie [00:06:08]:
I've got a few numbers for them.
Fernanda [00:06:11]:
As he scrambles to unlock his iPhone.
Archie [00:06:14]:
I think definitely keep an eye on this food rally. Like I mentioned earlier, and I'm going to use Ed's numbers again, we broke that 86 73 resistance level. He's got the next one pinned at 87 86. So, you know, if crude continues to tick up towards that level and we and up breaking that resistance, we could really see maybe potentially above 90. Crude is the one to look out for this week for sure.
Fernanda [00:06:38]:
We'll have to keep an eye out.
Archie [00:06:40]:
On that, keep those figures in mind.
Fernanda [00:06:43]:
All right, Archie. Well, this is my favorite part of the working week, as always. Thank you so much for coming on.
Archie [00:06:50]:
Thank you very much. Thoroughly enjoyed. See you next week.
Fernanda [00:06:55]:
Now, iron ore with James Robinson. What's been happening?
James Robinson [00:07:00]:
So the major news story of the week so far has been the fact that China hao slipped into deflation.
Fernanda [00:07:07]:
That sounds like a bad word.
James Robinson [00:07:08]:
Yeah, it's not ideal. It makes servicing debt a little bit harder. And it also tends to imply that people put off spending, as in anticipate prices coming lower in the future. So CPI came in 0.3% lower, which is the first decline since 2020, so the first in three years. So what we would typically expect in an era of deflation is consumers offset spending as they expect prices to come lower. In turn, producers cut production because you can't flog this stuff because no one's willing to buy it, because they expect it to be cheaper in a couple of months time. So the problems we've outlined in the property sector could heighten those issues associated with deflation. People cut spending in anticipation for lower prices, but at the same time their assets, their material assets in terms of house prices are going down. So people are feeling considerably poorer. And you also have the issue with youth unemployment. So it's a bit of a triple entente in terms of consumer woes. Those theoretical issues associated with deflation could be made considerably worse by the issues that we see in the property sector. So as house prices continue to fall, people feel materially poorer because the biggest asset they own is now worth less. So the incentive is then to cut back spending further. You've also got considerable problems, particularly in the youth labor market with 21% youth unemployment, and that is beginning to filter into the data. So the other big news of the week is the import export data that printed on Tuesday, both are down quite considerably. So these problems that we see for Chinese consumers are now beginning to filter through into the hard data. So the other big story of the week from an iron ore perspective was the import export data that we had out of China on Tuesday, both are down pretty considerably. On the import side, we were expecting a drop in imports of 5.6% year to date and that actually came in at 12.4% down year to date. So that is a really, really significant miss. And that backs up what we're saying about reduced consumer demand from China, specifically on iron ore, imports were down 2.1% in July, which is a three month low. And in line with the production cuts we saw on steel, does this started.
Fernanda [00:09:39]:
To affect the futures at all?
James Robinson [00:09:42]:
Yeah, so obviously the fall off in price has been pretty significant, very much the headline figure. So two weeks ago we hit a high of 116 and a half and yesterday we closed out just above the $100 mark at 100 spot five. So obviously a really, really aggressive move. In combination with that, we've also seen a big uptick in volumes. With a move this aggressive, we would expect quite a lot of short covering, so people just profit taking. On the flip side, as this move was so aggressive, we have seen quite a few people just looking to liquidate their position and just wait for the market to calm down a little bit before taking another directional move. Particularly in the last few days, we've seen a real uptick in liquidity at the back of the curve. So cal 24 25 and 25 26, as well as the cal 25 outrights, have seen a massive uptick in interest. The cow spreads over the tail end of last week and into this week have been trading eclipse as large as ten KT a month, which is really quite significant. So in terms of the actual tenors that we've seen trading at the front, we've seen a huge amount of selling interest on the front spreads, so Aug, Sep.org, Ox, those kind of tenors and we've also seen a real uptick in liquidity at the back of the curve as well. So cal 25 26 and cal 24 25 have both seen pretty sizable liquidity in clips of up to ten KT a month, which is a pretty significant trade, but we've also seen the back trading as outright, so we've had quite a lot of interest, particularly on the cal 25. So in times of high volatility in the iron ore market, we do typically see quite a big spike in interest in back end tenors and that will typically die down once the market sort.
Archie [00:11:33]:
Of stabilizes a little bit.
Fernanda [00:11:36]:
So what are we expecting to see in the week ahead?
James Robinson [00:11:39]:
So futures are up on the day, so we closed out with sep trading at 100 and 140 today, which is nearly a dollar and a half higher than yesterday's close. That said, the Singapore national holiday has taken a real hit on liquidity. There's been very little trading over the.
Hao Pei [00:11:59]:
Course of the day, so that would.
James Robinson [00:12:02]:
Probably explain the rally, despite all the bad news. So a further fall is definitely, definitely on the cards. And it wouldn't surprise me if we continue to see those volumes trading in.
Fernanda [00:12:17]:
Spite of whatever volatility lies ahead. James will be here to soldier on. I certainly will be fantastic to have you on as always, James. Thank you so much.
James Robinson [00:12:29]:
Thanks very much.
Fernanda [00:12:30]:
See you next week. So, Hao, you're going on vacation very soon to escape the blistering heat of Shanghai, you expect the rest of the market to do the same.
Hao Pei [00:12:46]:
Yeah, that's what people thought about when they are on holiday. They think the market they hope the market could be quiet, but things always be like reversed. Like when people leave their desk, the market is going to be crazy, but when they're back, markets be quiet again. It's very weird. It's like all through 2023 when I'm living for any reason, could be sick leave, could be conference leave, could be vacations. Every time I left the office, it looks like the market is going to a crazy mog.
Fernanda [00:13:21]:
Oh, wow. It's your fault. Anytime the market goes crazy, it's because you're taking a day off or you're away for a conference. You mentioned earlier that you were expecting August to be a bit quiet. Why is that?
Hao Pei [00:13:34]:
I think, as previously, like we've said, the market can be all through the year, be like rollercaster, be very volatile all through the year. It got to have some quiet period because August is traditionally a quiet period for less demand and less supply and construction site and downstream they need to take a rest in extreme weather. It's just similar to Christmas time to Chinese holidays, that period. So that two period of time are traditionally quite season of the year. And plus we just witnessed the huge move on iron ore, a huge spike on iron ore in July and June and then a big correction from the high by 10%. It's actually over 10%. I'm expecting after the big yeah, exactly ten point 61%. So I'm just generally expecting after few big movement, the market potentially become a little bit quiet after that.
Fernanda [00:14:38]:
And speaking on the correction, do you think that this is a sustainable or persisting correction for the rest of QC?
Hao Pei [00:14:48]:
Yeah, it's very interesting question. First of all, let's go with most recent news. We see the intraday movement or the intraday correction today or yesterday. It's all behind the news that the Country Garden, which is a big house developer China, they missed the two dollar bond payments totaled $22.5 million. Well, although the Country Garden says it's just liquidity stress in short run and they're going to use 30 day crease period to pay the coupons. However, obviously the market doesn't buy this. The market still like a correction. It still play a concerning mode on the default of the house developers. Well, for a little bit longer period of time, it's because the correction was more due to a little bit crowded position in both FGX and DCE. They all witnessed a year high positions, which could mean there are too many gamblers in this game because physical traders should clearly know there was a production restriction in July in China and production control over H Two 2023 plus a light season in August. So they need to leave the market at some point, not alone, but at some point right now, or before today, or before last. And moreover and the hot weather hit most of the areas in Asia and in China there's a heavy rain which caused the flood in Hubby province. So that all become contributors to pull back the performance of a Ferrous complex because that means less construction site works and a little bit low efficiency on the infrastructure projects.
Fernanda [00:16:51]:
Naturally it really sounds and it was a perfect storm.
Hao Pei [00:16:56]:
Yes, exactly. It's very extreme weather. It's all through Asia, it's the same circumstance in India and it's a similar circumstance in Indonesia and mean it's actually storm months in August in the Pacific area. So it believes we actually see an asset bait growth during the past two weeks because the capacity is really limited on the fee. So that's all became very relevant.
Fernanda [00:17:29]:
So it sounds like we're going to have at least a few quiet weeks. Anything else that we should be looking out for within the Ferris complex?
Hao Pei [00:17:42]:
I think first of all, from my point of view, irono's supply structure has been optimized during the past month by importing less premium mid grade and more discount and low grade FIS and steel margins are touched year high. It's very healthy. So I think the correction should be slowed down. That's why I'm thinking the market should be probably entering a flat period of time because it looks like there's a balanced supply and demand in the next couple of weeks. And I think the most interesting thing is that the macro market has a very tight connections or we say correlations with the commodities market in particular. In 2023, the correlation could be even higher than the past year. I think the big round of pound from early June July across the major commodities were mainly relying on improving expectations in major economies, including China and US and Europe, and the removal of some trade areas and more agreements signed and conferences, treaties and actions to support economies and consumptions, which was always considered a leading indicator of an economy, et cetera. However, the current correction in August was actually from the macro standpoint, it's more impacted by at a time investors started to wait and see more industrial change and more supporting factors into the policies and economies. They started to look into the minor side of economies and they feel like a little bit disappointed or they feel like they don't want to wait. So that caused the correction. So I think the most interesting thing for all the traders, analysts and every stakeholder of the market is they have to look at the macro side of the view at first and then they go ahead and go deeper and analyze the fundamentals or technical side different angles of the market. They can't just leave macro and say this is iron ore market, they need to study and learn about all the relevant market and started to learn about all the strategies, policies in different countries of the world and what's happening on the hotlines of the day. I think the most interesting fact, the most interesting thing right now that's all I want to say about outside the market.
Fernanda [00:20:24]:
Well, there you have it folks, sage advice from Hao Pei. Here's your freight update from Kerry Deal. All right, Kerry, so I hear you're trying to shed your reputation of being a bit of a bad news bear.
Kerry Deal [00:20:44]:
I am, I'm trying to shed my perma bear reputation.
Fernanda [00:20:48]:
Let's hear it.
Archie [00:20:48]:
Come at it.
Kerry Deal [00:20:49]:
Well, look, this is the second time now I've come on with news that is not all bad record breaking. I know, in fact the Cape market has been relatively well supported if range bound for the past couple of weeks. I said on the 26 July, the last time I was on here, that despite a couple of green shoots, the fundamentals did not really seem strong enough to take the market too far up. And in the main, I actually stand by that. The Baltic Exchange Cape five TC average was 14 379 on that day. Today it is 14 five two six. So while we have had some pretty consistent supports at these levels, the market hao not really been able to break out of this range. But let's start with the positives in the market. China's coal, iron ore and soybean imports totaled a robust very strong, in fact 142.5 million tons. According to Commodore Research last month, this was down month on month from June to July by 3.2 million tons or 2%, but is actually up year on year, 19.9 million tons or 16%. So that's looking pretty strong.
Fernanda [00:21:54]:
Any other specific growth areas that we should be looking at?
Kerry Deal [00:21:58]:
Well, within that I think the standout area is Australian thermal coal exports to China. They have recovered very well and the Cape sizes have been the main beneficiary of this. The monthly volumes of Australian thermal coal carried on Capes have risen from an average of 5.9 million tons in Q one of this year to 9.1 million tons in July. Now the bad news Smith, support like this so healthy, we would really want to see rates climbing a little bit more than what we've seen. Healthier fixing volumes out of Brazil this week have thinned that tonnage list. But sentiment, macro sentiment, I would say really overall remains very bearish. Today's news that China has slipped back into deflation has only darkened the picture a bit more.
Fernanda [00:22:41]:
All right, couldn't be all positive.
Kerry Deal [00:22:44]:
No, never.
Fernanda [00:22:47]:
So what should we be looking for in the coming week?
Kerry Deal [00:22:50]:
I would say look for support down the line as we move into Q Four from increased West African bauxite exports. I think I mentioned that a little bit last time. Things to be cautious of, really mainly still that downside risk from China. Will they maintain this level of imports?
Fernanda [00:23:04]:
And how's the paper looking on the.
Kerry Deal [00:23:07]:
Paper volumes have been relatively unexciting, typical for August September cape. Five TC paper is valued one 5400 at the moment on FIS Live, while the Q Four predictably a touch stronger. I think expectations are always a little stronger for that. Q Four sitting at one 6200 value now.
Fernanda [00:23:23]:
Now time for my favorite segment of yours. How are the Panamaxes?
Kerry Deal [00:23:26]:
Panamaxes have had a good run of it lately, relatively good run of it. The Baltic five TC average finally climbing back into five digit territory last Thursday with a steady grind upwards, really. Over the past week, the North Atlantic has been maybe the sunniest area of all that. Ta inquiry. Very active. Ta Inquiry keeping things ticking upwards. Front hall demand has not been quite as high, but it's still there and it's still growing. Things to look out for are growing. Tonnage list off the continent is still a concern, but for now, rates look supported at these levels, maybe even able to tick up a touch further. East coast South America has been more active as of late, and rates on the P Six route, that is delivery Singapore for a grained round voyage via east coast South America, they have ticked above $12,000. The Pacific has also been looking up with no pack rounds heard fixing this week between 8509 $500 a day. And Inquiry has finally on that no pack. For those no pack rounds gotten a lot busier. So that is all looking fairly supported and healthy, actually.
Fernanda [00:24:28]:
Fantastic. And the paper?
Kerry Deal [00:24:31]:
The paper has largely been ticking up slowly in line with the physical market. I would say it has struggled over the past couple of days to get above the $11,000 mark on that front month four TC contract. Some doubts may be creeping in a little bit about how much further the market can push, especially if those capes aren't moving up too much themselves. That might cap the Panamax a little bit. The Q four today again touch stronger. 11,650 on FIS live.
Fernanda [00:25:01]:
Fantastic. Thank you for that even handed positivity, Carrie, and we get you for another week, but then after that you're going to be shooting around the club.
James Robinson [00:25:10]:
Yeah.
Kerry Deal [00:25:10]:
Then I'm traveling again. So we'll find somebody to sub in.
James Robinson [00:25:14]:
Exactly.
Kerry Deal [00:25:14]:
No, but who? I'm sure can give an excellent commentary.
Fernanda [00:25:18]:
Yeah, wonderful. Thank you so much.
Kerry Deal [00:25:20]:
Thanks a lot.
Fernanda [00:25:22]:
Well, that's it for us this week. Thank you you so much for listening. And as always, if you miss us too much, visit our website, braiduppodcast.com, to check out show notes, listen to old episodes or leave us a comment. We'll see you next time.
Related Episodes
Slumps, bumps and oil pumps
We'll be exploring the reasons behind the substantial increase in the Cape size index, analysing the concerns surrounding the iron ore market, and discussing the impact of macroeconomic news and geopolitical tensions on market dynamics.
Cape market surge, and unveiling iron ore market and 2024 projections
The episode kicks off with an exciting revelation of record cleared volumes in the Cape size contracts on the 29th of November.
China's Politburo Meeting: How it Shapes the Iron Ore Market!
Insights from China's Politburo Meeting - James Robinson Shares Key Takeaways Are you interested in gaining insights into the potential impacts of China's Politburo meeting on the iron ore market? If so, this is the episode of our Freight Investor Services podcast for you. This week on ...