Iron Ore's Resurgence and Oil's Rally: Navigating the Current Commodity Climbs!
Hello and welcome back to Freight Up, the number 1 commodities and freight markets podcast from FIS.
I'm your host, Fernanda, and in this episode of Freight Up it's a mix of emotions as I'll be saying my final goodbye to you.
But before you and I dock for the last time, let's chart the course for today's adventure through the world of Freight and Commodities.
We'll welcome aboard Jessica Free, our very own new marketing executive, who'll share some tantalizing tidbits about the much-anticipated overhaul of our FIS Live app.
As we navigate through today's choppy waters, we'll examine the downturn in freight indices and investigate the iron ore market's surprising resurgence.
Plus, we'll dissect the impact of geopolitical turbulence on soaring oil prices.
Our crew of Freight Uppers for this episode includes:
Ben Klang, who'll talk us through bulk carrier rates
Hao Pei, whose market insights keep us ahead of the curve
And Archie Smith, the people's broker, who'll unpack the reasons behind crude oil's climb above $90...
So, grab your life vest as we set sail one last time together.
It's an honor to have been your captain here on Freight Up, and I'm thrilled to have you with me for one final voyage.
Useful links:
Timestamps
00:00 Freight market down, indices show negative trends.
04:36 Capes rates decreased, but recovered slightly.
09:23 China decreases mortgage rate, boosts housing market.
10:58 Iron market indicators improving, sustainable rebound expected.
14:33 OPEC continues production cuts, Middle East tensions boost prices.
This podcast uses the following third-party services for analysis:
Podder - https://www.podderapp.com/privacy-policy
00:00:00
This week on Freight up, the iron ore market heats up. But is this trend
00:00:04
sustainable? How pay weighs in on recent developments.
00:00:08
Ben Klang discusses the Cape size roller coaster ride we've been on.
00:00:12
And the people's broker Archie Smith gives us an update on the geopolitical
00:00:16
forces weighing heavily on oil prices. Freight up.
00:00:22
Hello and welcome back to freight up. My name's Fernanda and today is a
00:00:26
very bittersweet episode for me because it is the last time
00:00:30
that I'll be your host as we navigate the seeds of Britain commodities.
00:00:34
But we will save our goodbyes for where they belong at the
00:00:37
end. In the meantime, we are joined today by our new marketing
00:00:41
executive, Jess free. Welcome, Jess. How are you doing? Thanks,
00:00:45
Fernando. Great to be here. Now Jess is heading up the soon
00:00:48
to be revealed relaunch of FIS Live, our freight and
00:00:52
commodity app. Any spoilers you can give us today? Well, the launch of
00:00:56
version two is imminent and this comes with a complete redesign of the
00:01:00
platform. There's new products like EUAs, updated
00:01:03
technical charting and a custom dashboard. So this will allow you to
00:01:07
have all the FIS markets and information you want on one screen.
00:01:11
I'm going to try to sneak in a sneak preview after this show,
00:01:15
but in the meantime, this week we are bringing you
00:01:18
updates in freight, iron ore and of course, oil.
00:01:22
So sit back, relax and let's dive on in
00:01:26
with a roundup of the latest commodity. In Macro news,
00:01:31
Christophe Salmon and Jose Maria Larroca,
00:01:34
Trifegura's finance chief and top director, will be leaving the company
00:01:38
in the latest shakeup at the trading house. We also saw crude
00:01:42
oil top $90 a barrel as stock levels tumbled and
00:01:45
Middle east tensions continued to worry markets. Eagle bulk
00:01:49
shareholders have greenlit star bulk takeover, a deal
00:01:53
which will create the world's top publicly listed bulk owner with
00:01:57
a fleet of nearly 170 ships. And the EU
00:02:00
is exiting winter with gas storage at record levels, helped
00:02:04
by what was a mild winter, and focused attention on
00:02:08
the potentially crippling effect high prices and low supply could
00:02:11
have on Europeans. So before we get into the detail
00:02:15
of our major commodity market, let's take a look at the broad
00:02:19
market movements of this week.
00:02:23
Oh, how the winds of the freight market can change. We are down
00:02:27
across the board index wise, week on week on freight
00:02:30
indices. C five tc down 10% compared to last
00:02:34
Tuesday, the 2 April at
00:02:36
$17. P five
00:02:39
tc was also down 10%, closing yesterday at
00:02:43
$14.
00:02:46
Supermax, let's negative down only about
00:02:49
3.4%, closing at $13.
00:02:52
And the handy seven pc index
00:02:56
was down 4.7% at just a little
00:03:00
above $13. So it's a sea of red across the freight
00:03:03
forward this week. And it's also worth pointing out that the Cape
00:03:07
and Panamax indices are now also below their year to
00:03:11
date of 23 and
00:03:15
14, respectively.
00:03:18
Iron ore has reversed its negative spiral of the past weeks, the
00:03:22
62% index recovering from $102.25
00:03:26
on Tuesday, the second to $107.55
00:03:30
yesterday, up 5% for fuel oils.
00:03:33
So moves on the high sulfur fuel oil, up
00:03:37
13% to $492.07, much
00:03:41
less of a move on the lower sulfur Singapore fuel, only up barely
00:03:44
one dollar to six hundred thirty three dollars, fifty cents.
00:03:50
And now let's talk dry free with Ben Klang. So
00:03:54
Ben, Panamaxes are my personal favorite bulk
00:03:57
carrier because they remind me of my favorite palindrome, but you
00:04:01
strike me as the supermax person. Hi Fernando. Well,
00:04:05
it's funny you say that because that's where all of my freight career started
00:04:08
200 years ago, but I love all my children equally.
00:04:12
But on a serious note, it depends on what you want to achieve. They
00:04:16
all have their own charm, for example, because of its roots and it's
00:04:20
small numbers of different cargo as cape carries.
00:04:24
Some use it as a proxy for the chinese industrial growth and so
00:04:27
on. So it all depends what you would like to achieve. Well, it sounds like
00:04:31
capes have been quite the ride recently. What's going on with
00:04:35
them? Yes, capes, over the time
00:04:39
since our last podcast, which was basically two weeks ago, now,
00:04:42
almost has really felt like the moment on the roller coaster.
00:04:46
You know, when you dropped from the main high and left your stomach where you
00:04:50
start falling. We basically seen weaker cargo order
00:04:53
volumes across all the major basins, which has contributed
00:04:57
to the general negative sentiment, fundamentally
00:05:01
speaking. And we saw on the close 27
00:05:04
March, basically just before the Easter break, front month April
00:05:08
was trading at 23 7.50 in volume, then traded
00:05:11
down to 19 earlier this week to close
00:05:15
last night at 20 and a quarter. That being said, what's been
00:05:19
interesting down the curve is that the rates has been less
00:05:22
affected by this negative sentiment. Q two came back after the
00:05:26
Easter break at 25 500, trading to a low of
00:05:30
23 7.50 before moving back to 24
00:05:33
625 yesterday. Cal 25, on the other hand, was
00:05:37
slightly up, having moved from 19 750 last
00:05:40
Tuesday to 23 seven five yesterday.
00:05:44
On the Panamax. They also came under pressure last week,
00:05:48
not surprisingly, on the prompt month, April and May slipped
00:05:51
to 14 615
00:05:54
750 lows respectively, on Tuesday
00:05:58
last week edging down to 14 two and
00:06:02
15 3.75. You know, this negative sentiment, just
00:06:06
like the Capes, was less pronounced in the latter months. Q two of
00:06:10
the week was only down a few hundred bucks to around
00:06:13
15. Cal 25 basically on a non
00:06:17
move at 13.3. And last but not
00:06:20
least, the supermaxes. There was this mirror
00:06:24
trend of the larger ships. Last Wednesday was the
00:06:28
positive day that helped rates move up week on week.
00:06:32
April moved up to dollar 500 to yesterday's
00:06:35
close at 14 3.75. Q two up to
00:06:39
14 and Cal 25 was flattish
00:06:43
at twelve seven seven five.
00:06:47
So Ben, what's been happening volume wise this week? We
00:06:51
had nearly 42 lots cleared on
00:06:54
futures and 4300 lots on options
00:06:58
last week. That's lower than usual. But
00:07:02
as you know, yes, it was a four day weekend due to the Easter
00:07:06
holiday. The majority of the volume was on the larger
00:07:09
sizes. Capes and Panamax's futures trading saw
00:07:13
around 3890 lots and
00:07:17
3020 lots per day last week. Supermaxers
00:07:21
followed behind with an average of twelve. 140 lots
00:07:24
traded daily last week and it was a subdued week
00:07:28
for options, with 900 lots and
00:07:31
3400 loss being cleared on the Capes and
00:07:35
Panamaxes respectively. And as we moved on to this week,
00:07:38
more activity shifted to the Q three contract along with the
00:07:42
primary contracts, April Q two and Cal 25
00:07:46
open. Interest increased as position extended to further
00:07:49
months. In addition, we saw decent interest
00:07:53
on the voyage route c five, with
00:07:56
2.85 million tonnes traded on the front month
00:07:59
April and May contracts. Amazing. Ben,
00:08:03
I could listen to you read the phone book. Seriously, it's just the most
00:08:07
soothing freight update I've ever heard. Thank you so
00:08:11
much for that. And I'm excited to see where this tape roller coaster
00:08:14
takes us next. Thank you very much, Fernanda.
00:08:20
And now let's talk about iron ore with how pay. The thing on
00:08:23
my mind is this iron ore rebound that we've seen in the last few
00:08:27
days. Is there any particular reason for the optimism? When
00:08:31
we talk about iron on rebound, we have to brand our research
00:08:35
like we probably the very earliest people to
00:08:38
predict or to have market views about this
00:08:42
rebound in as early as late March because we
00:08:45
saw a recovery on iron usage. And
00:08:49
on the other side we also saw improving orders. On the
00:08:53
steel side, we also evaluate projects. They're
00:08:57
not growing projects comparing to the same
00:09:01
period of last year or two years ago, but
00:09:04
the total amount, the size is still there. So
00:09:08
we're saying the demand is probably coming late instead of total
00:09:12
vanishing. We're thinking if iron ore correct deep
00:09:15
enough we all see a rebound. It's either slow rebound or
00:09:19
a big rebound. We definitely won't seeing that it's dropping
00:09:23
forever. And I think on the news side
00:09:26
we're hearing that one of the biggest news china
00:09:30
decrease the roof of loan plan rate.
00:09:33
So let's see this example. Let's say if the mortgage rate
00:09:37
is 4% normally for banks they normally
00:09:41
set like a roof rate of 4% and the
00:09:44
ceiling rates let's say 4.1 but now they're taking
00:09:48
the 4% roof rate out which means some of the commercial
00:09:52
banks, some of the local banks they can offer as low
00:09:56
as they can afford for example they can offer as low as
00:09:59
3.5%. So that's a big news to house
00:10:03
buyers. So the market think it's stimulus on the housing
00:10:07
area. So that's two big things happen on the
00:10:10
market and moreover we have to say the global
00:10:14
market is playing the risk off sentiment. We
00:10:18
saw the crazy oil and crazy gold and
00:10:21
everything else in the metal sector witnessed a huge
00:10:25
growth in the beginning of April. So the
00:10:28
pharaohs have to be one of the other sector
00:10:32
but it's also supported also following those
00:10:35
growth at the commodity and I think those
00:10:39
are the major factors behind this big
00:10:43
growth in the last two days. Well
00:10:46
it makes sense why one of our reports was called ahead of the curve then
00:10:50
because you really are Halloween. So my next question is a bit of a
00:10:54
toughie but do you think this trend is sustainable?
00:10:58
I think the rebound will be sustainable at
00:11:02
least for a couple of weeks or even months left
00:11:05
because we're seeing like a lot of indicators
00:11:09
on iron on market is improving. Like for example the
00:11:13
big iron consumption is growing up and this growth is
00:11:17
not like taking one week or two from historical study.
00:11:21
The growth on each one for the big iron usage is normal
00:11:24
for the trajectory it's going up and it's going up for seven
00:11:28
to eight weeks and now it's coming down or mint and
00:11:32
at a certain level so we will see a marginal improving
00:11:36
on the demand side for more than two months in the falling two
00:11:40
months or even three months. So on the price side won't
00:11:43
probably like going up for the entire three
00:11:47
months but it has positive supports from
00:11:51
the fundamental side. And moreover we're
00:11:55
seeing, we're seeing the spread level, we're seeing the spread
00:11:58
structure is flat. When the spread structure is flat it's
00:12:02
normally signal that the commodity
00:12:06
is somewhere close to the bottom of the
00:12:09
valuation. And the other good news is the
00:12:13
steel margin. We're seeing the virtual steel margin in China
00:12:17
mentioned at 40 yuan. Bhutan, which is historically low level
00:12:20
for almost the entire q one, but it suddenly jumped
00:12:24
from 41% to 212
00:12:28
grand on this Monday and Tuesday. So
00:12:32
there were a huge growth on the margin side, which
00:12:35
gave the steel mills enough room to buy
00:12:39
raw materials. I think last but not least, let's
00:12:43
watch the global market, see if there's a
00:12:46
depreciation on us dollars or on the other side,
00:12:49
if the metal sector maintains strong, so which
00:12:53
can all become very strong support for the
00:12:57
iron market as well. Well, how? It sounds like we're just going to have
00:13:01
to wait and see, but luckily we have you to do that for
00:13:04
us. So thank you so much for your update,
00:13:08
Hal. It's been an absolute pleasure. Thank you.
00:13:12
Archie, how are you doing? I'm good, thank you. How are you
00:13:16
doing? Good. Last episode. Last episode. Very,
00:13:20
very sad. What a journey it's been. Yeah. The end of an era.
00:13:24
But the people's broker will go on, so that's all that matters. The
00:13:27
show must go on, Fernanda. Absolutely. So let's dive on in
00:13:31
here with the big headline here.
00:13:35
Crude has broken the upside of this year's range and rallied
00:13:39
above $90. Can you give us a bit of insight into what's
00:13:43
going on? Yeah, I mean, this month has been a lot more
00:13:46
exciting for the crude. After what was a really range bound Q one, that front
00:13:50
month contract traded like a five, well, maybe not even a five dollar range for
00:13:53
Q one. It was kind of 83 to 87, whatever it was. And
00:13:57
so for it to finally actually have a bit of direction, it's been quite exciting
00:14:01
for us. There's obviously the persistent factors of the geopolitical
00:14:04
tensions in the Middle east that's added to the fire
00:14:08
as well as this. I think the market's actually really starting to
00:14:12
feel that tightness in the supply from the OPEC
00:14:15
cuts. Obviously, OPEC were cut in production all
00:14:19
the second half of last year into this year. And now I think the market's
00:14:23
really starting to feel it. I know a few people in the market said that
00:14:26
OPEC have very much regained control of oil
00:14:30
prices, which is obviously what the cuts set out to do. Right. OPEC said that
00:14:34
their production cuts are going to continue into Q two of this year, so that's
00:14:37
bolstered prices. And then obviously there's been the ongoing
00:14:41
issues in the Middle east, which on that, contrarily
00:14:45
have also offered some downside pressure on the
00:14:48
days where news has reported, oh, you know, ceasefire
00:14:52
talks are making some progression. We've seen prices come off, but, you know, then
00:14:56
it's all very mixed news on that front. You know, one day it's, oh,
00:14:59
ceasefire talks are making progression and then the next day it's all one of the
00:15:03
parties, whether it's Israel or Hamas, have rejected a ceasefire
00:15:06
deal and then markets go back up. So it's all kind of here and
00:15:10
there on that front. But it definitely seems like for the moment, crude prices are
00:15:14
on the up. Sing spreads are coming off in the front. Why is that?
00:15:18
Yeah. So on the fuel side of things, we've seen
00:15:21
a lot. Well, on the low sulfur Singh spreads, the 0.5
00:15:25
stuff, theyre really tight in the front. Contracts gone down to like
00:15:29
$2 sub $2 in the high self stuff. Its
00:15:32
actually got into the negative territory. Id say the main reason for this is,
00:15:36
and what were hearing from some physical traders in Singapore is that theres ample
00:15:39
supply in the Singapore ports which is making the
00:15:43
stuff in the front a lot cheaper. Were also seeing
00:15:47
front cracks come off a little bit and a little bit
00:15:50
of lack of liquidity. I think theres been a lot of, theres been a couple
00:15:53
of Singh holidays this month. Theres one actually today. Theres less
00:15:57
flow going through the market. As you can see. The prices come off a little
00:16:00
bit. But I think, yeah, theyre definitely one to watch. Its
00:16:04
not ideal for those who have exposure hedge that are
00:16:07
looking to roll it to the next month because youre getting less
00:16:11
bang for your buck there. It begs the question, do we hit the floor
00:16:15
here with the May June seeing spreads and bounce back up later
00:16:19
in the month? Who knows? But yeah, theyre certainly very, very narrow at the
00:16:22
minute. Well, Archie, stick a fork in you. I think you're
00:16:25
done. Yeah. Oh, man. Well, it's been
00:16:29
an absolute pleasure to work with you over the past
00:16:33
year, Arch. It has a sad news that this is your last
00:16:36
one. Honestly, it's definitely very bittersweet.
00:16:42
Well, that's it for this week. Thank you so much for joining us. And make
00:16:46
sure to subscribe by clicking the subscribe button wherever you get your
00:16:49
podcast from. Also make sure you're following us on LinkedIn
00:16:53
or get signed up for our FIS live app to make sure that you never
00:16:57
miss any freight and commodity analysis from FIS. It has
00:17:01
been an honor to serve as your host over the past year.
00:17:04
I'd like to thank Neil Veglio, our show producer, for bringing the
00:17:08
glamour to our show. And ultimately, I'd like to thank you
00:17:12
for joining me as I learned to navigate the Sea of Brayton
00:17:15
commodities. Catch you later. Thanks again for joining us, and see you in a
00:17:19
couple of weeks time on FIS's Freight and commodity podcast. Freight
00:17:23
up, freight up.
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