Welcome back to "Freight Up," your go-to podcast for insights into the major freight and bulk commodity markets.
I'm your host, Davide, and this episode features our man in Shanghai, Hao Pei, who will dissect the recent news out of China and its impact on the iron ore market.
Archie Smith and Ben Klang will provide their analyses on the oil markets and freight rates, respectively.
We'll kick things off with a review of key economic indicators, including the European Central Bank's recent interest rate cut and the US employment data for May.
Then, Hao Pei will discuss rumours of China's potential refinancing project for affordable housing and its implications for iron ore.
Archie will shed light on fuel oil trends post-OPEC meeting and the surprising rally in high-sulphur fuel oil.
Finally, Ben will give an overview of FFA rates and the physical market developments, including iron ore and coal demand fluctuations.
Listen in for an information-packed episode that promises to keep you informed on all things freight and commodities.
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Timestamped summary
00:00 US economy added 272,000 jobs in May.
04:11 Iron ore market fluctuations, China housing support.
07:31 August Brent future benchmark fluctuated, up with demand.
12:11 Baltic Exchange rates rose with demand support.
14:01 Pacific shipping market fluctuates amidst demand changes.
00:00:00
Freight up hello
00:00:04
and welcome back to freight up. My name is Davide and today I will be
00:00:07
your host as we navigate the major freight and bull commodity markets.
00:00:11
In this episode, our expert Haupei will explain us what the latest
00:00:15
news in China mean for the iron ore market, and our
00:00:19
usual guests Archie Smith and Ben Klang will give
00:00:23
us their takes on the oil markets and the freight
00:00:26
markets. But as usual, lets take a look at the
00:00:30
latest news and the index movements since our last
00:00:33
episode. The European Central bank has
00:00:37
lowered the three key interest rates by 25 basis points in
00:00:40
June, in line with market expectations. The main
00:00:43
refinancing operations rate was lower to 4.25%,
00:00:47
the deposit facility rate to 3.75% and the
00:00:51
marginal lending rate to 4.5%. The UK
00:00:55
economy remains stable in April after a 0.5%
00:00:58
rise in March. The GDP reading is at the weakest performance in
00:01:02
four months. The US economy had the
00:01:05
272 jobs in May
00:01:09
2024, the most in five months compared to a downwardly
00:01:13
revised 165 in April and well above the
00:01:16
forecast of 185. The core
00:01:20
inflation rate in US, which is excluding volatile
00:01:24
items such as food and energy prices, rose by
00:01:27
0.2% month on month, moderating from the
00:01:31
0.3% increase in April. The annual korean
00:01:34
consumer price rate eased to a three year low of
00:01:38
3.5% in May, 3.4% in
00:01:41
May, down from 3.6 in the previous month.
00:01:46
Consumer prices in US were unchanged in May month on
00:01:50
monthly, and the annual inflation rate eased unexpectedly to
00:01:53
3.3%, hitting the lowest in three months.
00:01:59
Looking at the broad movements in the markets of the last
00:02:03
two weeks, we can have a very quick look in comparison to what
00:02:06
happened on the 4 June. In terms
00:02:10
of indexes, the four baskets have been mostly stable and positive
00:02:14
in comparison to the 4 June. Its worn northing a
00:02:18
plus 16% or $2 on the
00:02:21
P five Dc, which printed at
00:02:24
$17. We see more
00:02:27
modest gains on the other ships, with the S ten
00:02:31
Tc up $1 and the
00:02:34
c five Tc up 446%
00:02:38
at $24.
00:02:41
Lastly, stable the h seven Tc
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at $13.
00:02:50
After the drop from the highs of $120 a tonne.
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Iron ore has stabilized at $106, not that far from the
00:02:57
107 $208 threshold in
00:03:01
China. There have been rumors about a possible refinancing project for
00:03:05
affordable housing. What's the effect of this news on the
00:03:08
market? Stay tuned. We will have a chat with Hao Pei about it.
00:03:13
And finally looking at the fuel oils, they've been
00:03:16
both positive. The sing 380 is up to
00:03:20
$502.10 from
00:03:22
$494.22 and the single
00:03:26
five is up $30 at
00:03:29
$591.18.
00:03:34
And now we have Haupei, our senior analyst from our
00:03:38
Shanghai office. How, how are you doing today?
00:03:42
I'm doing great. How are you, David? I. Not too bad.
00:03:46
Not too bad. Can't complain. The weather is not that bad here in London
00:03:49
and we have a lot of questions about what's happening in the iron
00:03:53
ore market. So I will start with one. So
00:03:57
we have a price stabilization at around $107 to
00:04:01
$180. Now do you see
00:04:04
any directional movement? Looking at the near term,
00:04:09
I saw. Some difference in iron ore market in the last two
00:04:13
weeks. In particular on physical side,
00:04:17
iron ore saw some bottom hunting buyers following
00:04:21
after each correction of features. But for most of the time
00:04:24
previously, earlier this year, or earlier in
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each of the year, 80% of the time at least, physical buyers were
00:04:32
chasing high. Well, there was rumors saying about
00:04:36
China started to support refinancing projects on
00:04:40
affordable houses. Which is the good news?
00:04:44
Well, the bad news sites several provinces in China
00:04:47
published production restrictions on steels. Well,
00:04:51
however, the market said some mills potentially rushed some working hours
00:04:55
to produce more steels in Q two and Q three instead of Q four.
00:04:59
But we are not sure about it in mid run peak hour and
00:05:02
consumption was stable in at least
00:05:05
for June. But there will be more June
00:05:09
lickings from Australia. So slight bearish
00:05:13
fundamentals. If June margin started to widen
00:05:17
the iron ore could see better picture in short run. So
00:05:20
in general I don't see a clear directional movement iron
00:05:24
ore to be honest at this point. Thanks.
00:05:28
How and do you have any suggestions on the spreads?
00:05:31
I think for the active spreads, for example, July
00:05:35
August 2424 has decreased
00:05:38
to as low as forty cents to forty five cents
00:05:42
which fell into 10% or less on the low
00:05:46
range. However, we insist on that timing is not right
00:05:49
because we're not convincing that a bullish run is looming.
00:05:53
Short run. In other words, if we saw signals
00:05:57
of the recovery and all right side spread buying
00:06:00
opportunities with calm, however, it is worth a try.
00:06:04
If spread narrow to as low as
00:06:08
$0.35 or even $0.30, that's an absolutely
00:06:11
low level. Once spread goes up, it could double from
00:06:15
the current level. So it is worth to take a look at the current
00:06:19
spread level at this timing, but not a good timing just to
00:06:23
rush in. Thank you very much. How.
00:06:28
Thank you. And now
00:06:31
let's talk about fuel oil with our broker Archie
00:06:35
Smith. Archie, thank you very much for joining us again. Thank you for
00:06:39
having me again. A pleasure as always. So let's talk about
00:06:42
fuel oil. Crude has fully recouped the OPEC meeting
00:06:46
losses and has even pushed higher than the previous levels.
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What do you think there is actually supporting the market?
00:06:53
Yeah, I think there's a few things. Risk sentiment
00:06:56
definitely feels better. I think people, market players have got a bit more appetite
00:07:00
for risk at the minute. Another thing
00:07:03
is, we actually had API data come out
00:07:07
last night showing a build in
00:07:11
crude stockpiles. This would usually be quite bearish, but I think
00:07:15
that kind of testament to the feel of the market, they've come kind of
00:07:18
just looked right through it and it's made no difference at all. I think there
00:07:21
was a crude build of about 2.4 million barrels around
00:07:25
that level. And yeah, normally, obviously we see crude come off a little bit off
00:07:29
on that kind of number. Nothing's happened. But yeah, I mean, going to what you
00:07:32
said after that OPEC meeting at the beginning of the month, the
00:07:36
benchmark, the August Brent future benchmark,
00:07:39
came down to a low of 76. 76. And
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when I left my desk, we was just kind of trading just over the 85
00:07:46
level. So, I mean, you know, that's, that's up like $9
00:07:49
almost in the space of a few weeks. So, yeah, certainly quite
00:07:53
bullish in that sense. I think you could argue that
00:07:57
another supporting factor is the US going into driving
00:08:00
season. That's normally where we see quite a big shift in
00:08:04
demand. That being said, I actually saw a statistic this
00:08:08
week that the gasoline demand in the US was down 17% year
00:08:11
on year, which is pretty drastic, although I
00:08:15
think the market expects that to pick up. And yeah, driving season is
00:08:19
a usual kind of seasonal demand factor that you could put into this
00:08:23
equation. As well as risk sentiment. I think other
00:08:27
commodities are rising in price, equities rising in price. I think
00:08:30
it's all just kind of green market. Really.
00:08:35
Good news for the investors then. Yes, good news for the longs. Exactly.
00:08:39
For the bulls and in the high sulfur fuel oil, what's
00:08:42
happening there? Yeah, so it's really been
00:08:46
rallying at the minute, which again comes as a bit of
00:08:50
a surprise. I thought off the back of the Opec meeting, all the high
00:08:54
sulfur stuff was going to come softer. This is
00:08:57
because obviously OpEc said that they looking at
00:09:01
maybe trickling some supply. Back in Q four, a lot of the
00:09:04
OPEC crudes are sour crudes. So high sulfur content and
00:09:08
therefore a lot of the high sulfur fuel oils are a byproduct of refining these
00:09:11
crudes. So, with more of those crudes in the market, I thought there'd be more
00:09:14
abundance of high sulfur fuel oil or, well, there would be more abundance of high
00:09:18
sulfur fuel oil. And therefore, I sort of thought that the high sulfur
00:09:21
market structure would soften. We're actually seeing the opposite.
00:09:25
It's really rallying, maybe because there is still
00:09:29
tightness. We're not at Q four yet. We're still looking
00:09:32
at front month and Q three. There is still tightness from less
00:09:36
OPEC sour crude supply. I think another thing is
00:09:40
we've seen in the trading windows, we've
00:09:43
seen quite a lot of bidding it up, a lot
00:09:47
of window plays. I mean, the 380 spreads,
00:09:51
they're up. I think they were kind of sitting steady around the $8 per
00:09:55
barrel. Sorry, $8 per metric ton mark. This is the July Augie 380
00:09:58
spread. So the front spread. Yeah, I've been sitting around the $8 mark for
00:10:02
last kind of week, just over a week, and then yesterday it rallied, and
00:10:06
today it's trading around $10.50. So quite a substantial
00:10:10
over $2 rally. Again, not hearing much from the market,
00:10:13
fundamentally, I think it could definitely be a few
00:10:17
big physical guys rolling their exposure. There's a few things to look
00:10:21
at again. The Rotterdam high sulfur barge crack as well.
00:10:25
That's up, like a dollar on the week. So, yeah, the whole high sulfur structure
00:10:28
is rallying. So, yeah, be one to sort of look out for.
00:10:32
Very good. Also, like, something to look for is the euros. What's your
00:10:36
prediction? Who's going to win? My prediction is I've thought through this quite
00:10:39
carefully. I think it's going to be England Portugal
00:10:43
final. Obviously,
00:10:47
I want England to win, but you got to keep your head on your shoulders.
00:10:50
We are notorious at choking it at the final hurdle.
00:10:54
So I'm hedged either way. Right. If England
00:10:57
win, I'm happy emotionally, if Portugal win, I
00:11:01
win money on a bet. So either way, if that's what the final is, and
00:11:04
that's what it comes to, I'm win win either way.
00:11:08
That's. That's a very good way to put it. Okay, ladies and gentlemen, you heard
00:11:11
it first. Okay. According to our emotional
00:11:15
hedge. Emotional hedge, exactly. So, England, Portugal.
00:11:19
Well, I mean, like, I am, of course, biased, so I don't really agree with
00:11:22
the prediction. But regardless of that, Archie, always a pleasure having you.
00:11:26
So I will see you. We will talk to you again in two weeks time.
00:11:28
Is that all right? We'll get an update on the euros. Exactly. Yeah. We'll have
00:11:32
it as a separate section from now on until the end. Thank you very much.
00:11:35
Nice one. Thank you, mate.
00:11:41
And now let's talk about dry freight with our resident in
00:11:45
Copenhagen, Ben Clank. Ben, how are you doing?
00:11:52
Very well, thank you. A bit of traveling lately, so it's nice to
00:11:56
be back. Yes. So excited about today's
00:11:59
show. Very good, very good. Ben, let me ask you
00:12:03
the first question. What can you tell us about the FFA
00:12:07
rates? What happened last week's in the market?
00:12:11
Well, the Baltic Exchange headline drive figures
00:12:14
increased again last week, but this time around the rise
00:12:18
was actually supported by the mill size and the smaller vessels.
00:12:22
If we start with the Cape market had its low start to the
00:12:25
week due to the holidays in Asia. And on Tuesday, with
00:12:29
reports from the decline in demand in the Pacific, June was
00:12:33
trading down to $24. The rest of the week
00:12:37
we saw rates rebounding off. Tuesdays low. By
00:12:40
Friday, June capes were trading to highs at
00:12:44
25 425. But, you know, the
00:12:48
real star of the show last week was actually the paramaxes. There was a
00:12:51
significant growth in the market driven by a strong demand
00:12:55
in the Atlantic that was mostly gradient centric.
00:12:59
And the index rose by 1525. Sorry,
00:13:02
27 points, reaching a month highs. By
00:13:06
Tuesday, June had traded up to 15, four and
00:13:10
July up to 16. By Friday,
00:13:14
rates has pushed all the way up to 15, nine, seven,
00:13:17
five and then similarly the supermaxes
00:13:21
absurd growth, though to more modest rate last
00:13:25
week. On Monday there was little movement, closing flat to Friday with
00:13:28
July at 15. But however, as
00:13:32
the Atlantic trips gained some traction, we saw
00:13:35
rates, though they appeared slightly
00:13:39
suppressed by the weaker asian market. Nevertheless, you
00:13:43
know, on Friday we were seeing June and July both hitting
00:13:47
highs 49 and 50 and 650.
00:13:51
Thanks, Ben. And can you maybe tell us something more
00:13:55
about what was going on in the markets? On the physical side?
00:14:01
Yes, of course. I mean, last week, capesized
00:14:05
spot and prompt contracts ended. We embarge no
00:14:08
losses, though some midweek optimistic fuel by strong
00:14:12
iron ore and coal demand in the Pacific kept the market from
00:14:16
declining too strongly. However, holidays in Asia
00:14:20
and eight tempered the market, causing Pacific
00:14:24
rates to drop below their starting points. With a c five iron ore
00:14:28
route rates initially falling from
00:14:31
ten dollars seventy cents to ten dollars thirty cents
00:14:36
before rebounding to $10.60.
00:14:40
Weekly Cape iron ore shipment bounced back to
00:14:43
33.1 million tonnes, a
00:14:46
14.5% increase. And
00:14:49
coal shipments rose by 32.6%
00:14:53
to 7.6 million tonnes, reflecting
00:14:57
a positive demand outlook amidst tight
00:15:01
less vessel supply. On the other hand,
00:15:04
Panamax rate strengthened luxweg amid robust activity
00:15:08
in the air in the atlantic basin and high
00:15:12
demands for coal and grain, with coal shipments rising by
00:15:16
2.9% to 15 million tonnes and
00:15:19
grain shipments increasing to 5.8
00:15:23
million tonnes. Despite this, minor
00:15:27
bulk shipments declined for the third consecutive week,
00:15:30
dropping by 8.4% to
00:15:34
3.6 million tonne. Notable
00:15:37
fixtures included South Atlantic trip with
00:15:41
82 kt of grains initially fixed over
00:15:45
21, dipping midweek
00:15:49
to 18 and then firming
00:15:53
up to 22, while asian
00:15:57
coal shipments from Indonesia to west coast India
00:16:00
fixed in the lows to mid eleven s and
00:16:04
air to Singapore Japan at 17 500.
00:16:08
Conversely, there was limited grain inquiries in the asian
00:16:12
market, with a Pacific round trip
00:16:16
rumored to be fixed at 1605 to
00:16:20
16 715. Thank you very much Ben for
00:16:23
your update, has been very useful as always and I
00:16:27
wish you a nice day. And that's it for this
00:16:31
week. Make sure to subscribe by clicking the subscribe button
00:16:35
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00:16:38
LinkedIn or get signed up to our app FIS live
00:16:42
so you will never miss any freight and commodity analysis from
00:16:46
FIS. Thanks again for joining me and we will
00:16:49
see you in two weeks time on our FIS Freight and
00:16:53
commodity podcast. Freight up.