Happy 2024. And happy almost year of the

dragon. A 62% drop from early

January to now. How pay has got the insight on what factors

are impacting the iron ore market and how this could affect the rest

of Q one OPec has strengthened calls for production

cuts. But will everyone stay in line? Archie Smith has

some thoughts for you, along with analysis on what has proven to

be a roller coaster of a year so far for crude

oil. So stay tuned because we have all this and more on

freight up. Freight up.

Welcome back to freight up. My name is Fernanda and I'll be your host as

we navigate the seas of freight and commodities. I'm reporting to you live from

a wind tunnel. Just kidding. Those are my airpods. But I am down under

in the home of Rio Tinto, so you might notice a bit of

difference in our sound quality this week. But nonetheless, we are so

excited to be back and bring you the latest and greatest in

freight commodity news. This week we've got updates

from Smith 7th himself, hao pay, reporting

straight from Shanghai. And without further ado, here he

is, the people's broker, Smith seven.

Archie Smith is back in the studio.

But times have changed, folks. He is not the

same Fis backstreet boy from yesterday. No,

if you see Archie Smith at one of our FIS

events, you won't recognize him because he's grown some facial hair.

And frankly, I don't know who he is anymore. Archie, how are you

doing? I'm all good, thank you, Fernanda. I'm all good. Good to

be back in the seat. It's been a while. Good to be speaking with you

again. I'm in the home of Rio Tinto, though, so

it's pretty nice down under in Australia, the land

that gave us Theo and Tim. But besides

that, enough of iron ore, which is all anyone talks about

here, what's been going on in oil. I

suppose I'll kind of do a roundup of the year so far, seeing as we've

not had a podcast yet. It was all pretty, not

non exciting from the turn of the year. We were pretty range bound,

and this is to talk about the crude. We were range

bound pretty much the entirety of Jan, I've got the levels here. Kind of

found the floor around $75 per

barrel, just under, and then it was testing resistance at like

$80.75 a barrel. And we was in that range for a whole

month with the market

participants tussling between geopolitical tensions,

soft demand outlook, potential oversupply, et

cetera, et cetera. Anyway, right at the end of Jan, we

broke that range. We broke the upper end of that range and kind of hit

the yearly highs. And that was triggered by

a massive or much larger than expected

drawback in us crude stockpiles. I think it was just shy

of 10 million barrels drawback for the week. And that kind of

offered that extra kick to break us out of that range, which we did.

I think the highs touch

$84 per barrel, just over 80, $417 per

barrel. Since then, we've kind of slipped back

off. We're very much looking just in the week or on the week

we're in the red, and that's due to

potential thought of oversupply. Basically what's happening is the

non OPEC members have really, really stepped up in terms of production,

especially the US, who have come out the back of that kind of down

period when a lot of their production facilities were affected by cold weather,

kind of December and beginning of Jan, but us come out

of that now their production is ramping up. And as

well as this, for those of you who were listening last year,

I talked a lot about OPEC cuts, and new OPEC cuts are always

getting introduced. Basically, there's a lot of OPEC members

that may not be sticking to those as

promised. We did mention this a bit last year. It seemed like

there was, it felt like it was

disjointed. Yeah, it very much was disjointed, and it still

feels that way. That's just kind of the consensus of the market.

People think that some of those members aren't going to be sticking to the

cuts or at least as compliantly as they should

be. So again, that's kind of adding downward pressure

on prices and just kind of general soft

economic data, especially out of China.

When China economy looks weak, oil goes down. When China economy looks strong, oil goes

up. That's kind of very much the case in 99% of the time,

and that's what we're seeing here. So kind of all those downward pressures have

helped us just kind of come back off into the red.

But the last couple of days we have actually seen some support, and

again, it just goes back and forth, back and forth. We've seen support last couple

of days because now there's been a couple more Houthi strikes

on vessels in the Red Sea and also the US.

They've basically confirmed that they are going to be continuing their strikes on Houthi,

rebel outposts or compounds, whatever, in

retaliation to the three, I believe, personnel

that they unfortunately lost in a strike attack. So

we're kind of just in this point of limbo, really, where the short term direction

is not too visible. If something happens in the Middle east, conflict wise, we go

up and then later on in the day there'll be some weak economic data, we'll

go back down. It's just kind of back and forth at the minute. It

sounds like the year of the dragon is going to be a new

chapter in what has already been a storied year for

crude, at least. How are other segments doing?

Yeah, so I suppose the main talking point in the fuel at the

minute would be the high sulfur east west. It's getting absolutely

hammered. Not down the pub

front month contract, which is the. Oh,

and for those listeners who may be new to the market or new to

the podcast, the high sulfur east west is the differential between the

high sulfur fuel coming in the Singapore hub and the high sulfur

fuel oil in the Rotterdam hub. So kind of what it says on the

tin, east west, high sulfur. So it's a price

differential contract. So that's well into the negative.

Now, it's down about $13 on the week, I think last trading

around minus ten, negative ten, which means that the

euro counterpart is trading a $10 premium to the

Singapore counterpart. So that's been coming

off like four or $5 a day. Reason for that?

I think ahead of Chinese New Year, you might be able to argue that there's

a lack of interest from kind of east asian buyers

ahead of the holiday. And we've also just noticed that in

the Shanghai arbitrage window, there have been net sellers of

the high sulfur Singh, which is just kind of adding that downward pressure to the

380 contracts against the barges, therefore kind of

getting that differential deeper into the negative

territory. Another factor affecting that, something that's actually

providing strength to the high sulfur barges, which is the european high sulfur

fuel oil, is the crack is really strong at the minute. It's

up about $4 on the week. I'm hearing that there's some

big physical players who are quite well bid kind of into

q three on the high sulfur euro crack, which

is providing a lot of strength in the front, and again pushing that

east west down. The strength in the high sulfur euro

crack has really tightened up the high five

spread. High five spread being the price difference between the

very low sulfur fuel oil and the high sulfur fuel oil in the same hub.

So you have a euro high five and this thing high five. So looking at

the euro high five, I mean, it's tightened up about $20 on the week because

of that strength in the high sell for crack. So it was around

$115 for the front month contract last week. And I think we're looking around

kind of like $97 here. And we've seen a similar change in

the Singh high five as well. About $20 on the week. So much tighter

there. It's not beneficial for those

who have scrubber fitted vessels. If you've got your scrubber fitted vessel,

your interest to the high five being as wide as possible. So you're getting more

bang for your buck. And before we let you go,

Archie, I have one last question for you. And

that's what's your biggest takeaway for the week so far?

My biggest takeaway will definitely be

keeping and eye on the high sulfur east west.

Look where it's going for any kind of potential arbitrage

opportunities. Obviously you got to take into account that the high sulfur

barge is trading higher than the Singapore 380

counterpart. I think with that being the thing that's moving the

most at the minute in an otherwise pretty stagnant

market, I think that's what you've got to keep your eye on.

There you have it, folks. The people's broker has spoken.

Archie, thank you so much. Amazing as

always. No problem. Thank you for having me on the show,

Fernanda.

Now let's talk iron ore with how pay.

We are back and it is halpay, ladies and gentlemen.

Hao. How the heck are you? I'm fantastic. I can't

wait for the new year coming in two days. That's amazing.

Do you have a pretty big celebration plan? Not really.

I need to reunion with my family and it's

really out of tickets everywhere. It's like

very crowded and I think it's going to be very

expensive as well on the flights. So I'm not planning

to travel really at this time, but probably by the last few

days. Well, that makes sense. At least you'll have some really

yummy food. But on that note, do you think the market fis already on

vacation mode? Exactly. We

still see iron ore drop first day or

two over this week. It's more

following the poor performance of equity market,

I'm sure. But from this Wednesday we clearly see

iron ore was really consolidated in a

dollar or even narrow range for the whole day.

And there is zero physical trade on the other side.

So I think at least from this Wednesday, the

market is entering holiday mode. That's

awesome. What other insights do you have to share with

our wonderful audience? It's been quite a while.

I'm sure they've missed you and there's. A lot to catch up on

with success. We say that the market is going to have a big

drop in summer, early February or late January

and we keep mentioning the top reversal risk

in January report, although I think most of the

analysts and traders were very optimistic at

that point of time because they hear a lot of China stimulus

and they hear a lot of the US interest cock.

It's all good news for iron ords. It's all macro news. They

happen every day consistently. And why we mentioned

there's a huge risk on narrow market was that the Pei IRa

entered a descending trend although the data was

showing a slight pickup. But we think there are

some of over calculation on that sample base which

ignored some of the northern China capacities. But in fact

northern mills carried more production than the south

areas. But from the fasting, planning and

maintenance as well as some of the oversupply of

semifinished deals, we observed that pick iron

consumption is going down in January and it's over calculated.

That's how we reached this conclusion. And at the meantime,

the stocks of iron ores were growing at significant

pace, at least 200 and 300 million tons per

week. And steel mills feel pressure on raw materials

because of the highest dogs plus low margin

last for more than five months and delivery was

similar to last year. However, the port congestion is much

better than the last three years and the heavy snow impact

mostly emit China but it's not

impacting the northern ports and its logistics

inside of China were steady. So fundamental wise

we're clearly feeling a bearish sentiment from this

January. That's why we mentioned a high valuation risk

and the market's priced at risk and it's going down

significantly. Well on the other side, I

think the big news would become a

huge indicator for the market should be

trading to pull the bureau in early March and

at the same time US Womack is going to have the

most important conference to discuss interest rate

during the same week or two. So I think both could

have a huge impact on market. There will be a lot of stories going

on even during Chinese New year and even during the light

season. And this is a very

interesting time because normally by now the index and

fundamentals are usually affected by the chinese long

holiday. But that isn't the case this year, is it?

I don't think so because there are already a lot of

news going on January and February. It's going to be a

very exciting year at least exciting?

Let's say exciting Q one than any of Q

one during the past five years for importers, the February

index is almost fixed for the first half. Bills tend

to hold cautious fuel and buying port cargoes. But

in addition, the huge appreciation of us dollars

by 4% during the past three weeks, if it's

going down, it will support iron ore value. So there will be a lot

of things going on on either the long

side or the short side. There will be fights against both the

two camps. I think it's not going to be a quiet Q one

naturally, and the other huge

thing is Brazil court is still struggling

with the bank collapse payment to the

civilians and there'll be a lot of stars going on on

that side as well, although which happened like four

years ago. But there will be a lot of irritations of stories,

different versions, news media going on

because the president of Brazil is environmental

protectors. And I think there'll be a lot of stories going

on in this Q one as well. If we

go to the fundamental side, the iron ore is at least

2.5 times than the overall cost plus rate.

It's on 85% value of its price.

But for example, some of the asian equities, like China

equities is only at 10% lower range. And

some of the commodities like agriculture,

they are running as low as like 20 or 30

percentiles. I mean, if we compare it with those

commodities, if we standing on a fund to invest

in a basket of commodities, iron ore is not cheap

at this point of time. So just overall, I think we still need to

mention that the iron oil price is still like, it's

still like slightly overpriced at this value and at this

level, we still need to be aware of it even. There could be

some of the encouragement on the macro side or

recovery of demand after Chinese New Year. It

sounds like one way or another, the year of the dragon, at least for

iron ore, is going to take us on a wild

ride. Luckily for you and for me, we have Hal pay to keep us on

the edge of our seats and on top of the news. Hal, thank you so

much for this update. It's nice to work with you again, buddy. Thanks,

Fernando, I feel the same way. Thank you. Well,

sick of fork and us. That's it. We're done for this week. But we will

see you next week. And I know you may be suffering from a bit of

abandonment from our two month hiatus, but we are

back and have some exciting news for you next week.

But in the meantime, John B. Needs a personal favor

from you and that is to go to Apple

Podcasts, Spotify or wherever you get your podcast, and

to hit the button that says subscribe on it. Yes, that's

right. The big man himself said that you must

subscribe to freight up podcast this week.

Assuming that you went and did that, we can go peacefully. We'll see you

next week. Freight up.