China’s Economic Developments & Fuel Oil Rallies

Freight up hello

and welcome back to freight up. My name is Davide and today I will be

your host as we navigate the major freight and bull commodity markets.

In this episode, our expert Haupei will explain us what the latest

news in China mean for the iron ore market, and our

usual guests Archie Smith and Ben Klang will give

us their takes on the oil markets and the freight

markets. But as usual, lets take a look at the

latest news and the index movements since our last

episode. The European Central bank has

lowered the three key interest rates by 25 basis points in

June, in line with market expectations. The main

refinancing operations rate was lower to 4.25%,

the deposit facility rate to 3.75% and the

marginal lending rate to 4.5%. The UK

economy remains stable in April after a 0.5%

rise in March. The GDP reading is at the weakest performance in

four months. The US economy had the

272,000 jobs in May

2024, the most in five months compared to a downwardly

revised 165,000 in April and well above the

forecast of 185,000. The core

inflation rate in US, which is excluding volatile

items such as food and energy prices, rose by

0.2% month on month, moderating from the

0.3% increase in April. The annual korean

consumer price rate eased to a three year low of

3.5% in May, 3.4% in

May, down from 3.6 in the previous month.

Consumer prices in US were unchanged in May month on

monthly, and the annual inflation rate eased unexpectedly to

3.3%, hitting the lowest in three months.

Looking at the broad movements in the markets of the last

two weeks, we can have a very quick look in comparison to what

happened on the 4 June. In terms

of indexes, the four baskets have been mostly stable and positive

in comparison to the 4 June. Its worn northing a

plus 16% or $2,500 on the

P five Dc, which printed at

$17,585. We see more

modest gains on the other ships, with the S ten

Tc up $1,065 and the

c five Tc up 446%

at $24,595.

Lastly, stable the h seven Tc

at $13,050.

After the drop from the highs of $120 a tonne.

Iron ore has stabilized at $106, not that far from the

107 $208 threshold in

China. There have been rumors about a possible refinancing project for

affordable housing. What's the effect of this news on the

market? Stay tuned. We will have a chat with Hao Pei about it.

And finally looking at the fuel oils, they've been

both positive. The sing 380 is up to

$502.10 from

$494.22 and the single

five is up $30 at

$591.18.

And now we have Haupei, our senior analyst from our

Shanghai office. How, how are you doing today?

I'm doing great. How are you, David? I. Not too bad.

Not too bad. Can't complain. The weather is not that bad here in London

and we have a lot of questions about what's happening in the iron

ore market. So I will start with one. So

we have a price stabilization at around $107 to

$180. Now do you see

any directional movement? Looking at the near term,

I saw. Some difference in iron ore market in the last two

weeks. In particular on physical side,

iron ore saw some bottom hunting buyers following

after each correction of features. But for most of the time

previously, earlier this year, or earlier in

each of the year, 80% of the time at least, physical buyers were

chasing high. Well, there was rumors saying about

China started to support refinancing projects on

affordable houses. Which is the good news?

Well, the bad news sites several provinces in China

published production restrictions on steels. Well,

however, the market said some mills potentially rushed some working hours

to produce more steels in Q two and Q three instead of Q four.

But we are not sure about it in mid run peak hour and

consumption was stable in at least

for June. But there will be more June

lickings from Australia. So slight bearish

fundamentals. If June margin started to widen

the iron ore could see better picture in short run. So

in general I don't see a clear directional movement iron

ore to be honest at this point. Thanks.

How and do you have any suggestions on the spreads?

I think for the active spreads, for example, July

August 2424 has decreased

to as low as forty cents to forty five cents

which fell into 10% or less on the low

range. However, we insist on that timing is not right

because we're not convincing that a bullish run is looming.

Short run. In other words, if we saw signals

of the recovery and all right side spread buying

opportunities with calm, however, it is worth a try.

If spread narrow to as low as

$0.35 or even $0.30, that's an absolutely

low level. Once spread goes up, it could double from

the current level. So it is worth to take a look at the current

spread level at this timing, but not a good timing just to

rush in. Thank you very much. How.

Thank you. And now

let's talk about fuel oil with our broker Archie

Smith. Archie, thank you very much for joining us again. Thank you for

having me again. A pleasure as always. So let's talk about

fuel oil. Crude has fully recouped the OPEC meeting

losses and has even pushed higher than the previous levels.

What do you think there is actually supporting the market?

Yeah, I think there's a few things. Risk sentiment

definitely feels better. I think people, market players have got a bit more appetite

for risk at the minute. Another thing

is, we actually had API data come out

last night showing a build in

crude stockpiles. This would usually be quite bearish, but I think

that kind of testament to the feel of the market, they've come kind of

just looked right through it and it's made no difference at all. I think there

was a crude build of about 2.4 million barrels around

that level. And yeah, normally, obviously we see crude come off a little bit off

on that kind of number. Nothing's happened. But yeah, I mean, going to what you

said after that OPEC meeting at the beginning of the month, the

benchmark, the August Brent future benchmark,

came down to a low of 76. 76. And

when I left my desk, we was just kind of trading just over the 85

level. So, I mean, you know, that's, that's up like $9

almost in the space of a few weeks. So, yeah, certainly quite

bullish in that sense. I think you could argue that

another supporting factor is the US going into driving

season. That's normally where we see quite a big shift in

demand. That being said, I actually saw a statistic this

week that the gasoline demand in the US was down 17% year

on year, which is pretty drastic, although I

think the market expects that to pick up. And yeah, driving season is

a usual kind of seasonal demand factor that you could put into this

equation. As well as risk sentiment. I think other

commodities are rising in price, equities rising in price. I think

it's all just kind of green market. Really.

Good news for the investors then. Yes, good news for the longs. Exactly.

For the bulls and in the high sulfur fuel oil, what's

happening there? Yeah, so it's really been

rallying at the minute, which again comes as a bit of

a surprise. I thought off the back of the Opec meeting, all the high

sulfur stuff was going to come softer. This is

because obviously OpEc said that they looking at

maybe trickling some supply. Back in Q four, a lot of the

OPEC crudes are sour crudes. So high sulfur content and

therefore a lot of the high sulfur fuel oils are a byproduct of refining these

crudes. So, with more of those crudes in the market, I thought there'd be more

abundance of high sulfur fuel oil or, well, there would be more abundance of high

sulfur fuel oil. And therefore, I sort of thought that the high sulfur

market structure would soften. We're actually seeing the opposite.

It's really rallying, maybe because there is still

tightness. We're not at Q four yet. We're still looking

at front month and Q three. There is still tightness from less

OPEC sour crude supply. I think another thing is

we've seen in the trading windows, we've

seen quite a lot of bidding it up, a lot

of window plays. I mean, the 380 spreads,

they're up. I think they were kind of sitting steady around the $8 per

barrel. Sorry, $8 per metric ton mark. This is the July Augie 380

spread. So the front spread. Yeah, I've been sitting around the $8 mark for

last kind of week, just over a week, and then yesterday it rallied, and

today it's trading around $10.50. So quite a substantial

over $2 rally. Again, not hearing much from the market,

fundamentally, I think it could definitely be a few

big physical guys rolling their exposure. There's a few things to look

at again. The Rotterdam high sulfur barge crack as well.

That's up, like a dollar on the week. So, yeah, the whole high sulfur structure

is rallying. So, yeah, be one to sort of look out for.

Very good. Also, like, something to look for is the euros. What's your

prediction? Who's going to win? My prediction is I've thought through this quite

carefully. I think it's going to be England Portugal

final. Obviously,

I want England to win, but you got to keep your head on your shoulders.

We are notorious at choking it at the final hurdle.

So I'm hedged either way. Right. If England

win, I'm happy emotionally, if Portugal win, I

win money on a bet. So either way, if that's what the final is, and

that's what it comes to, I'm win win either way.

That's. That's a very good way to put it. Okay, ladies and gentlemen, you heard

it first. Okay. According to our emotional

hedge. Emotional hedge, exactly. So, England, Portugal.

Well, I mean, like, I am, of course, biased, so I don't really agree with

the prediction. But regardless of that, Archie, always a pleasure having you.

So I will see you. We will talk to you again in two weeks time.

Is that all right? We'll get an update on the euros. Exactly. Yeah. We'll have

it as a separate section from now on until the end. Thank you very much.

Nice one. Thank you, mate.

And now let's talk about dry freight with our resident in

Copenhagen, Ben Clank. Ben, how are you doing?

Very well, thank you. A bit of traveling lately, so it's nice to

be back. Yes. So excited about today's

show. Very good, very good. Ben, let me ask you

the first question. What can you tell us about the FFA

rates? What happened last week's in the market?

Well, the Baltic Exchange headline drive figures

increased again last week, but this time around the rise

was actually supported by the mill size and the smaller vessels.

If we start with the Cape market had its low start to the

week due to the holidays in Asia. And on Tuesday, with

reports from the decline in demand in the Pacific, June was

trading down to $24,000. The rest of the week

we saw rates rebounding off. Tuesdays low. By

Friday, June capes were trading to highs at

25 425. But, you know, the

real star of the show last week was actually the paramaxes. There was a

significant growth in the market driven by a strong demand

in the Atlantic that was mostly gradient centric.

And the index rose by 1525. Sorry,

27 points, reaching a month highs. By

Tuesday, June had traded up to 15, four and

July up to 16,000. By Friday,

rates has pushed all the way up to 15, nine, seven,

five and then similarly the supermaxes

absurd growth, though to more modest rate last

week. On Monday there was little movement, closing flat to Friday with

July at 15,000. But however, as

the Atlantic trips gained some traction, we saw

rates, though they appeared slightly

suppressed by the weaker asian market. Nevertheless, you

know, on Friday we were seeing June and July both hitting

highs 49 and 50 and 650.

Thanks, Ben. And can you maybe tell us something more

about what was going on in the markets? On the physical side?

Yes, of course. I mean, last week, capesized

spot and prompt contracts ended. We embarge no

losses, though some midweek optimistic fuel by strong

iron ore and coal demand in the Pacific kept the market from

declining too strongly. However, holidays in Asia

and eight tempered the market, causing Pacific

rates to drop below their starting points. With a c five iron ore

route rates initially falling from

ten dollars seventy cents to ten dollars thirty cents

before rebounding to $10.60.

Weekly Cape iron ore shipment bounced back to

33.1 million tonnes, a

14.5% increase. And

coal shipments rose by 32.6%

to 7.6 million tonnes, reflecting

a positive demand outlook amidst tight

less vessel supply. On the other hand,

Panamax rate strengthened luxweg amid robust activity

in the air in the atlantic basin and high

demands for coal and grain, with coal shipments rising by

2.9% to 15 million tonnes and

grain shipments increasing to 5.8

million tonnes. Despite this, minor

bulk shipments declined for the third consecutive week,

dropping by 8.4% to

3.6 million tonne. Notable

fixtures included South Atlantic trip with

82 kt of grains initially fixed over

21,500, dipping midweek

to 18,750 and then firming

up to 22,250, while asian

coal shipments from Indonesia to west coast India

fixed in the lows to mid eleven s and

air to Singapore Japan at 17 500.

Conversely, there was limited grain inquiries in the asian

market, with a Pacific round trip

rumored to be fixed at 1605 to

16 715. Thank you very much Ben for

your update, has been very useful as always and I

wish you a nice day. And that's it for this

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