Freight Falls, Iron Ore's Rise & Oil Market Heats Up!

This week on Freight up, the iron ore market heats up. But is this trend

sustainable? How pay weighs in on recent developments.

Ben Klang discusses the Cape size roller coaster ride we've been on.

And the people's broker Archie Smith gives us an update on the geopolitical

forces weighing heavily on oil prices. Freight up.

Hello and welcome back to freight up. My name's Fernanda and today is a

very bittersweet episode for me because it is the last time

that I'll be your host as we navigate the seeds of Britain commodities.

But we will save our goodbyes for where they belong at the

end. In the meantime, we are joined today by our new marketing

executive, Jess free. Welcome, Jess. How are you doing? Thanks,

Fernando. Great to be here. Now Jess is heading up the soon

to be revealed relaunch of FIS Live, our freight and

commodity app. Any spoilers you can give us today? Well, the launch of

version two is imminent and this comes with a complete redesign of the

platform. There's new products like EUAs, updated

technical charting and a custom dashboard. So this will allow you to

have all the FIS markets and information you want on one screen.

I'm going to try to sneak in a sneak preview after this show,

but in the meantime, this week we are bringing you

updates in freight, iron ore and of course, oil.

So sit back, relax and let's dive on in

with a roundup of the latest commodity. In Macro news,

Christophe Salmon and Jose Maria Larroca,

Trifegura's finance chief and top director, will be leaving the company

in the latest shakeup at the trading house. We also saw crude

oil top $90 a barrel as stock levels tumbled and

Middle east tensions continued to worry markets. Eagle bulk

shareholders have greenlit star bulk takeover, a deal

which will create the world's top publicly listed bulk owner with

a fleet of nearly 170 ships. And the EU

is exiting winter with gas storage at record levels, helped

by what was a mild winter, and focused attention on

the potentially crippling effect high prices and low supply could

have on Europeans. So before we get into the detail

of our major commodity market, let's take a look at the broad

market movements of this week.

Oh, how the winds of the freight market can change. We are down

across the board index wise, week on week on freight

indices. C five tc down 10% compared to last

Tuesday, the 2 April at

$17,854. P five

tc was also down 10%, closing yesterday at

$14,699.

Supermax, let's negative down only about

3.4%, closing at $13,091.

And the handy seven pc index

was down 4.7% at just a little

above $13,000. So it's a sea of red across the freight

forward this week. And it's also worth pointing out that the Cape

and Panamax indices are now also below their year to

date of 23,834 and

14,113, respectively.

Iron ore has reversed its negative spiral of the past weeks, the

62% index recovering from $102.25

on Tuesday, the second to $107.55

yesterday, up 5% for fuel oils.

So moves on the high sulfur fuel oil, up

13% to $492.07, much

less of a move on the lower sulfur Singapore fuel, only up barely

one dollar to six hundred thirty three dollars, fifty cents.

And now let's talk dry free with Ben Klang. So

Ben, Panamaxes are my personal favorite bulk

carrier because they remind me of my favorite palindrome, but you

strike me as the supermax person. Hi Fernando. Well,

it's funny you say that because that's where all of my freight career started

200 years ago, but I love all my children equally.

But on a serious note, it depends on what you want to achieve. They

all have their own charm, for example, because of its roots and it's

small numbers of different cargo as cape carries.

Some use it as a proxy for the chinese industrial growth and so

on. So it all depends what you would like to achieve. Well, it sounds like

capes have been quite the ride recently. What's going on with

them? Yes, capes, over the time

since our last podcast, which was basically two weeks ago, now,

almost has really felt like the moment on the roller coaster.

You know, when you dropped from the main high and left your stomach where you

start falling. We basically seen weaker cargo order

volumes across all the major basins, which has contributed

to the general negative sentiment, fundamentally

speaking. And we saw on the close 27

March, basically just before the Easter break, front month April

was trading at 23 7.50 in volume, then traded

down to 19,000 earlier this week to close

last night at 20 and a quarter. That being said, what's been

interesting down the curve is that the rates has been less

affected by this negative sentiment. Q two came back after the

Easter break at 25 500, trading to a low of

23 7.50 before moving back to 24

625 yesterday. Cal 25, on the other hand, was

slightly up, having moved from 19 750 last

Tuesday to 23 seven five yesterday.

On the Panamax. They also came under pressure last week,

not surprisingly, on the prompt month, April and May slipped

to 14 615

750 lows respectively, on Tuesday

last week edging down to 14 two and

15 3.75. You know, this negative sentiment, just

like the Capes, was less pronounced in the latter months. Q two of

the week was only down a few hundred bucks to around

15,000. Cal 25 basically on a non

move at 13.3. And last but not

least, the supermaxes. There was this mirror

trend of the larger ships. Last Wednesday was the

positive day that helped rates move up week on week.

April moved up to dollar 500 to yesterday's

close at 14 3.75. Q two up to

14,650 and Cal 25 was flattish

at twelve seven seven five.

So Ben, what's been happening volume wise this week? We

had nearly 42,300 lots cleared on

futures and 4300 lots on options

last week. That's lower than usual. But

as you know, yes, it was a four day weekend due to the Easter

holiday. The majority of the volume was on the larger

sizes. Capes and Panamax's futures trading saw

around 3890 lots and

3020 lots per day last week. Supermaxers

followed behind with an average of twelve. 140 lots

traded daily last week and it was a subdued week

for options, with 900 lots and

3400 loss being cleared on the Capes and

Panamaxes respectively. And as we moved on to this week,

more activity shifted to the Q three contract along with the

primary contracts, April Q two and Cal 25

open. Interest increased as position extended to further

months. In addition, we saw decent interest

on the voyage route c five, with

2.85 million tonnes traded on the front month

April and May contracts. Amazing. Ben,

I could listen to you read the phone book. Seriously, it's just the most

soothing freight update I've ever heard. Thank you so

much for that. And I'm excited to see where this tape roller coaster

takes us next. Thank you very much, Fernanda.

And now let's talk about iron ore with how pay. The thing on

my mind is this iron ore rebound that we've seen in the last few

days. Is there any particular reason for the optimism? When

we talk about iron on rebound, we have to brand our research

like we probably the very earliest people to

predict or to have market views about this

rebound in as early as late March because we

saw a recovery on iron usage. And

on the other side we also saw improving orders. On the

steel side, we also evaluate projects. They're

not growing projects comparing to the same

period of last year or two years ago, but

the total amount, the size is still there. So

we're saying the demand is probably coming late instead of total

vanishing. We're thinking if iron ore correct deep

enough we all see a rebound. It's either slow rebound or

a big rebound. We definitely won't seeing that it's dropping

forever. And I think on the news side

we're hearing that one of the biggest news china

decrease the roof of loan plan rate.

So let's see this example. Let's say if the mortgage rate

is 4% normally for banks they normally

set like a roof rate of 4% and the

ceiling rates let's say 4.1 but now they're taking

the 4% roof rate out which means some of the commercial

banks, some of the local banks they can offer as low

as they can afford for example they can offer as low as

3.5%. So that's a big news to house

buyers. So the market think it's stimulus on the housing

area. So that's two big things happen on the

market and moreover we have to say the global

market is playing the risk off sentiment. We

saw the crazy oil and crazy gold and

everything else in the metal sector witnessed a huge

growth in the beginning of April. So the

pharaohs have to be one of the other sector

but it's also supported also following those

growth at the commodity and I think those

are the major factors behind this big

growth in the last two days. Well

it makes sense why one of our reports was called ahead of the curve then

because you really are Halloween. So my next question is a bit of a

toughie but do you think this trend is sustainable?

I think the rebound will be sustainable at

least for a couple of weeks or even months left

because we're seeing like a lot of indicators

on iron on market is improving. Like for example the

big iron consumption is growing up and this growth is

not like taking one week or two from historical study.

The growth on each one for the big iron usage is normal

for the trajectory it's going up and it's going up for seven

to eight weeks and now it's coming down or mint and

at a certain level so we will see a marginal improving

on the demand side for more than two months in the falling two

months or even three months. So on the price side won't

probably like going up for the entire three

months but it has positive supports from

the fundamental side. And moreover we're

seeing, we're seeing the spread level, we're seeing the spread

structure is flat. When the spread structure is flat it's

normally signal that the commodity

is somewhere close to the bottom of the

valuation. And the other good news is the

steel margin. We're seeing the virtual steel margin in China

mentioned at 40 yuan. Bhutan, which is historically low level

for almost the entire q one, but it suddenly jumped

from 41% to 212

grand on this Monday and Tuesday. So

there were a huge growth on the margin side, which

gave the steel mills enough room to buy

raw materials. I think last but not least, let's

watch the global market, see if there's a

depreciation on us dollars or on the other side,

if the metal sector maintains strong, so which

can all become very strong support for the

iron market as well. Well, how? It sounds like we're just going to have

to wait and see, but luckily we have you to do that for

us. So thank you so much for your update,

Hal. It's been an absolute pleasure. Thank you.

Archie, how are you doing? I'm good, thank you. How are you

doing? Good. Last episode. Last episode. Very,

very sad. What a journey it's been. Yeah. The end of an era.

But the people's broker will go on, so that's all that matters. The

show must go on, Fernanda. Absolutely. So let's dive on in

here with the big headline here.

Crude has broken the upside of this year's range and rallied

above $90. Can you give us a bit of insight into what's

going on? Yeah, I mean, this month has been a lot more

exciting for the crude. After what was a really range bound Q one, that front

month contract traded like a five, well, maybe not even a five dollar range for

Q one. It was kind of 83 to 87, whatever it was. And

so for it to finally actually have a bit of direction, it's been quite exciting

for us. There's obviously the persistent factors of the geopolitical

tensions in the Middle east that's added to the fire

as well as this. I think the market's actually really starting to

feel that tightness in the supply from the OPEC

cuts. Obviously, OPEC were cut in production all

the second half of last year into this year. And now I think the market's

really starting to feel it. I know a few people in the market said that

OPEC have very much regained control of oil

prices, which is obviously what the cuts set out to do. Right. OPEC said that

their production cuts are going to continue into Q two of this year, so that's

bolstered prices. And then obviously there's been the ongoing

issues in the Middle east, which on that, contrarily

have also offered some downside pressure on the

days where news has reported, oh, you know, ceasefire

talks are making some progression. We've seen prices come off, but, you know, then

it's all very mixed news on that front. You know, one day it's, oh,

ceasefire talks are making progression and then the next day it's all one of the

parties, whether it's Israel or Hamas, have rejected a ceasefire

deal and then markets go back up. So it's all kind of here and

there on that front. But it definitely seems like for the moment, crude prices are

on the up. Sing spreads are coming off in the front. Why is that?

Yeah. So on the fuel side of things, we've seen

a lot. Well, on the low sulfur Singh spreads, the 0.5

stuff, theyre really tight in the front. Contracts gone down to like

$2 sub $2 in the high self stuff. Its

actually got into the negative territory. Id say the main reason for this is,

and what were hearing from some physical traders in Singapore is that theres ample

supply in the Singapore ports which is making the

stuff in the front a lot cheaper. Were also seeing

front cracks come off a little bit and a little bit

of lack of liquidity. I think theres been a lot of, theres been a couple

of Singh holidays this month. Theres one actually today. Theres less

flow going through the market. As you can see. The prices come off a little

bit. But I think, yeah, theyre definitely one to watch. Its

not ideal for those who have exposure hedge that are

looking to roll it to the next month because youre getting less

bang for your buck there. It begs the question, do we hit the floor

here with the May June seeing spreads and bounce back up later

in the month? Who knows? But yeah, theyre certainly very, very narrow at the

minute. Well, Archie, stick a fork in you. I think you're

done. Yeah. Oh, man. Well, it's been

an absolute pleasure to work with you over the past

year, Arch. It has a sad news that this is your last

one. Honestly, it's definitely very bittersweet.

Well, that's it for this week. Thank you so much for joining us. And make

sure to subscribe by clicking the subscribe button wherever you get your

podcast from. Also make sure you're following us on LinkedIn

or get signed up for our FIS live app to make sure that you never

miss any freight and commodity analysis from FIS. It has

been an honor to serve as your host over the past year.

I'd like to thank Neil Veglio, our show producer, for bringing the

glamour to our show. And ultimately, I'd like to thank you

for joining me as I learned to navigate the Sea of Brayton

commodities. Catch you later. Thanks again for joining us, and see you in a

couple of weeks time on FIS's Freight and commodity podcast. Freight

up, freight up.