Dry Freight Drama, Iron Ore volatility and Crude Oil Cash Rise

And we are back with our usual programs after our us energy special

episode. But don't worry, you won't be bored. We will have

a look at the latest movements in the dry freight markets that

will make the milk curdle in the team of most commodity

market traders. We also get the latest updates

on the iron ore and finish with the significant rally in crude

oil, which has hit levels not seen since October

2023. More on this in today's episode of Freight

up. Freight up.

Hello and welcome back to Freight up. My name is Davide and I will be

your host as we navigate the seas of freight and commodities. We will start

with a roundup of the latest commodity news and then we are joined

by Ben Klang for dry freight, Haupei on iron ore, and

Archie's meat on fuel oil. But let's start with our

roundup of the latest commodity and macro news.

New orders for manufactured durable goods in the United States

rose by 1.4% 4% month over month in February

2024, surpassing market expectations of a

1.1% increase. And after a downwardly revised

6.9% fall in January, it appears that Russia

has started providing oil directly to North Korea, going against UN

sanctions. According to satellite images shared by the Financial

Times by the Royal United Service Institute, at least

five north korean ships have travelled to Russia to acquire oil. The

collapse of the Baltimore bridge may have some important trade

implications. According to some initial estimates, the cost of

rebuilding the bridge may be over $600 million, but the

port is closed for all maritime and road traffic until

further notice. All incoming and outgoing maritime

traffic will have to be rerouted and this may trigger supply chain

disruptions. And just when you thought

that the dry FFA market might be taking a breather snaps back the other

way. The Cape size have gone down 25%, dropping

significantly week on week. Again, we see why this market has been labeled the

widowmaker with movements like that. Something, as we

shall explore later, has also been seen in the futures market as well as in

the index. The Panamax index was less dramatic with a move

down of 17.8%, taking some of the negative

sentiment from the larger ships. Supras and handicies were

relatively non movers compared to the other index week on week, with

supramaxes up 1.81% and the handicy is down

0.4%. On the iron ore side, we edge ever closer

to that $100 level with a 62% index printing at

$104.20. And on the fuel oil side

we see the Sync 380 going up like

$1.17 or plus 0.2% while

the single five is going down

$6.26 equal to one.

And now let's talk about dry freight with Ben Clang. Ben, how are you

doing today? David, very nice, thank you. Spring has

finally came to come to Copenhagen. And Copenhagen, as you know,

has probably the worst winter in Europe. It's plus one

degrees and horizontal rain. So we're really happy that we're

seeing lighter times here. Wow, it feels like it's even worse than London.

And it's sunny here today too. So we are both lucky, but

we are actually all ears. And it's not about only the weather, but we also

want to hear what's your take on the week that has just passed in the

dry freight market? We saw the baltic dry index fell last week

after six consecutive weeks of gain and this was mainly

due to poor cargo demands and growing tonnage list in the Atlantic for the

Cape and the Panamaxes. But, you know, in normal order,

let's start with the roller coaster that is the Cape FFA market. You

know, after a quiet Monday last week, we really started to see

some drama on Thursday as early buying saw

the April contract trade as high as

35,600. From this high came sharp

selling with April trading down to low

27,000 by Wednesday. We did then see

a strong rally on Thursday with April trading up to 30

and a half at close and then before quite

end to the week on Friday and to then this week see

rates quickly moving south with April. I just looked

now closing last night at 23,000

over to the Panamaxes. We had a really similar

starts as the Capes. We saw some positive early moves

on April which traded up to 20,650

and q two trading up to 19 and a half in the beginning of last

week. Rates then came under pressure midweek with April sold

down to 18,000 and q two traded down to

17,250 in good size.

Thursday saw April trading up to 18 and a half, while May

traded up to 18 850 and June up to

17,000 to then see some range bound

activity and then followed by a quiet

Friday on Monday. This week, April printed

initially at 17,750 to then

quickly traded down to 17,000, q two down

to 16 eight and then at yesterday's close we saw

softer numbers will April at 15 350 and Q

two at 15 850. Lastly, the

supermaxes rates did see some early last

week support with April and Q two traded up to

16,750 and

16,600 and Q two traded up to

15 four a tick up from prior Friday's

close. Tuesday we saw April trade a tick

softer at 16 five, while Q three traded at 15

five. As always, focus on the prompt. But also on

Wednesday we saw that with April and Q two traded at 15

7.50 and 15 5.50 respectively.

Thursday saw minimum movement to then on Friday

we saw April trading down to 15 one, which is

600 lower than from Thursday's close,

and then on the Q two that traded down to 15

200. This week opened to a quieter market as

April traded approximately $300 lower than

Friday's closed and stayed pretty range bound throughout

the day. And then to see both April and Q

two closing on a softer territory

at 14 350 yesterday.

In terms of like volumes, what do you think? How did the past

week look like? Not surprisingly, the market started with

comparatively low volume on Monday, but with the price movement that

we outlined earlier, it was not a big surprise that we saw trading volume

pick up mid week. On average, Cape and Panamax's

futures traded at 7100

lots and 5740

lots per day respectively. Supermax has followed behind with

an average of 1940 lots

traded daily. On the options side, attention remained on the

Panamaxis with 3700

lots cleared last week. And meanwhile on the

Capes option we also saw decent activity with

1440 lots cleared. As trading volume

surged on the larger vessels, open interest increased alongside,

sharply falling prices. As of yesterday, March

25, open interest on Cape five tc stood at

187,181

lots and that's up 5700 week

on week. Panamax is four tc at

188 624 lots

and that's up 4120 week on

week and on Supress PenTC

89,788 lots and that's

up 1620 week on week. Thank you

very much ben, for your weekly update on the drive freight

market. Thank you.

And now let's talk about Hyrunor with how pay I have

the first question for you, which is guess what about

the iron ore market? So do you expect any directional

change in the short run? That is a high, frequently

asked question when the market is actually boring. But

if the market is quite volatile, people won't ask you. As we

discussed with a lot of clients and brokers during the

past two weeks, the volatility of iron ore increased after

a seven month inclination and two months of

big correction, and I would believe a full round of

cycle ended for iron ore. But iron ore entered a

small or even midterm neutral sentiment. The

original step? Well, traders started to become more

cautious by making any directional decision. I feel

the same way. The answer for this question is as simple as

no, I don't see any clear directional

change, at least for now. But in fact I saw

some spread opportunities which will be

disheartening question too probably, but no idea on the

direction so far as I said, but from fundamental peak

iron show near 3% decrease than

past Q one on a year basis. But we

expect a slight catch up in April and May.

So slow recovery normally subject to a narrower

room on price level in both ways and poor stocks

were too high. Given two to three weeks of piling up it could

create historical level seasonally in mid

April. Fundamental is still bearish to be honest

we have to say, but it's dangerous to build aggressive position

on the short side after 20% collection as well and still

in the busy housing season. Okay, so we spoke about the short

run and in terms of like the long run strategies, anything in

the market happening right now? Yep. I think first of all the

hour end level looked very neutral to me, as I said in the

last question, but even 95 to

115 would give enough room to look out

for directional trade. But if we also put rolling

into consideration, however, I think month spread

from May June 24 was too flat,

which should be undervalued at this time. The Q

two demand would pick up slightly late but not totally

missing. The pickup should be slow. That's why traders

were trying to shift back positions which crossed the

flat structure nowadays. But when the structure is

already there, I mean it's already flat. Why don't we try to think

about the opposite way, at least start to build some of the last

branch. And second of all, I think the MB

65 versus plate averaged

at 12.5% $4 in March, which was almost

similar to 12.6 in February. But

the supply in Brazil is always tighter than Australia

from Taiwan. This is potentially not fully

written in the stories of this particular strap. I think

there could be more stories about the supply side

going on in April and May. And moreover, I think

with seasonal recovery of China's physical steel margin give them

more acceptance on the high grid finance. Like

I said, these are long run opportunities. From my

perspective. We might not see a quick change in the short run

for those spreads, but it's worth considering for as a

long run trip. And now let's talk

about fuel oil with Archie's meat. We've seen that crude rallied

the last week to some levels that we haven't seen since October

2023. What do you think that are the factors that are offering

some support to the prices in this moment? It's very

multifaceted we hit levels not since October.

The recent highs been kind of 87 70 in the

front Brent future, which is, it was good to see Brent

break out of the top band of the range that we've seen for the majority

of the year. Really lots of things to look at. I'd say

mainly one being the ukrainian drone

strikes on russian oil infrastructure. I think theres been

seven or eight hits so far on

refineries, rigs, etc. Etc. And thats really kind of

providing some tightness in supply from Russia, especially kind of on the heavier crude

side of things as well as some products. Another thing also kind of came up

at the beginning of this week was the potential for the US

to reinstate sanctions on Venezuela. Just before the turn of the

year. There were talks, obviously, and actually kind of happened. The US were lifting their

oil sanctions on Venezuela kind of as a political play, kind of

regarding elections. So, yeah, basically as soon as that news

dropped, again adding some support to prices, I dont think thats

a major thing to look at because, I mean, even when the sanctions were first

announced a few months ago, they were going to get lifted. Thats the kind of

thing that it takes at least a year to actually see physical

supply get back there. Thats not an instant change thing anyway. So I

wouldnt say thats one of the more important points. I think another thing

thats kind of adding some support to the prices is the

OPEC cuts. They kind of said that they were

cutting for Q two of this year. It seems that as though there's a lot

more unity in the group now. The cuts at the

end of last year kind of seemed very slap dash. It seemed like some people

didn't agree. Well, that was the case. Some of the members didn't want to do

it, some members did. It was a bit all over the place, whereas now they

kind of seem more unanimous. I think the market's definitely feeling a little bit

of a squeeze from the OPEC output cuts. Okay.

Yeah. And then, as always for the opaque cuts, we will have to a little

bit like wait and see and then like how the market is private. Exactly. I

mean, you know, another thing is they've got a meeting coming

up and it's very much expected. It'll be a quick brief meeting

and no changes to be made to any kind of quotas.

I think they're kind of, by the sounds of it, the ministers are happy with

how it's going, are happy with the output, and it's going to remain this way

for the next meeting. Also, another thing that

like we have mentioned here, is that like we have seen like some, a little

bit of less softness in the front of the very low sulfur fuel oil curve

this week, is that correct? Yes, we have. So particularly yesterday, actually, the

front cracks more so in the sing, the Singapore very low

sulfur fuel oil, the front cracks softened by about fifty

cents. And the front spread, the April may spread, just

the difference in price between the April contract and the May contract, they both came

off quite significantly. April May spread is trading around

2.75, which is down about $4 on the week

and down about $2 since the beginning of, well, since Monday.

Normally this spread, the April racing spread, is not that tight.

Yeah, kind of 250, very narrow margin there.

And I think a lot of that just comes from Platts pricing

and settlement numbers coming in a lot lower than the market is expecting. I mean

that's what I've heard from a few people. I've asked, they've said that, yeah,

basically it's pricing in the April, Singapore is

pricing in much lower than what people are thinking and they can't really

get their head around it. And that's why we've kind of seen weakness in the

crack, weakness in the spreads. It certainly looks like it could still go that way,

although that being said, it is turn of the month in a few days.

So yeah, I mean, what else to report on today? We've had a few of

the kind of end user shipping guys sniffing around. Cal 26, single, .5

cal 25. So we're looking at some more long dated

stuff. Few interests there, people to look into. Lock in

some long dated hedges there. But yeah, other than that, all good

in the hood. And then we'll eyeing in the long weekend for

Easter. Yes, yes, yes. I'm quite looking forward to that. I'll make

a quick point tomorrow. If anyone is looking to get anything hedged or

any trades locked in, it's an early european window. So we shut at around

1230. Liquidity will dry up well from kind of twelve

to one, I think. You. Yeah, that's your last chance. So half day for us

tomorrow. Last chance to get it done. Yes, last thing to get any trades in,

any exposure you might have to. Cover before we get into like our

Easter eggs and. Exactly. I've already been well into the

Easter eggs. I'm not waiting. Thank you very much for joining us today,

Archie. Have a good one. Thank you for having me. Cheers.

And that's it for this week. Make sure to subscribe by clicking on

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be taking a short break for the Easter holiday, but we will be back again

with you shortly. Thanks again for joining us, and we hope

to see you again soon on our next episode of Freight up.