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.
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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
This week on Freight up, the iron ore market heats up. But is this trend
Speaker:sustainable? How pay weighs in on recent developments.
Speaker:Ben Klang discusses the Cape size roller coaster ride we've been on.
Speaker:And the people's broker Archie Smith gives us an update on the geopolitical
Speaker:forces weighing heavily on oil prices. Freight up.
Speaker:Hello and welcome back to freight up. My name's Fernanda and today is a
Speaker:very bittersweet episode for me because it is the last time
Speaker:that I'll be your host as we navigate the seeds of Britain commodities.
Speaker:But we will save our goodbyes for where they belong at the
Speaker:end. In the meantime, we are joined today by our new marketing
Speaker:executive, Jess free. Welcome, Jess. How are you doing? Thanks,
Speaker:Fernando. Great to be here. Now Jess is heading up the soon
Speaker:to be revealed relaunch of FIS Live, our freight and
Speaker:commodity app. Any spoilers you can give us today? Well, the launch of
Speaker:version two is imminent and this comes with a complete redesign of the
Speaker:platform. There's new products like EUAs, updated
Speaker:technical charting and a custom dashboard. So this will allow you to
Speaker:have all the FIS markets and information you want on one screen.
Speaker:I'm going to try to sneak in a sneak preview after this show,
Speaker:but in the meantime, this week we are bringing you
Speaker:updates in freight, iron ore and of course, oil.
Speaker:So sit back, relax and let's dive on in
Speaker:with a roundup of the latest commodity. In Macro news,
Speaker:Christophe Salmon and Jose Maria Larroca,
Speaker:Trifegura's finance chief and top director, will be leaving the company
Speaker:in the latest shakeup at the trading house. We also saw crude
Speaker:oil top $90 a barrel as stock levels tumbled and
Speaker:Middle east tensions continued to worry markets. Eagle bulk
Speaker:shareholders have greenlit star bulk takeover, a deal
Speaker:which will create the world's top publicly listed bulk owner with
Speaker:a fleet of nearly 170 ships. And the EU
Speaker:is exiting winter with gas storage at record levels, helped
Speaker:by what was a mild winter, and focused attention on
Speaker:the potentially crippling effect high prices and low supply could
Speaker:have on Europeans. So before we get into the detail
Speaker:of our major commodity market, let's take a look at the broad
Speaker:market movements of this week.
Speaker:Oh, how the winds of the freight market can change. We are down
Speaker:across the board index wise, week on week on freight
Speaker:indices. C five tc down 10% compared to last
Speaker:Tuesday, the 2 April at
Speaker:$17,854. P five
Speaker:tc was also down 10%, closing yesterday at
Speaker:$14,699.
Speaker:Supermax, let's negative down only about
Speaker:3.4%, closing at $13,091.
Speaker:And the handy seven pc index
Speaker:was down 4.7% at just a little
Speaker:above $13,000. So it's a sea of red across the freight
Speaker:forward this week. And it's also worth pointing out that the Cape
Speaker:and Panamax indices are now also below their year to
Speaker:date of 23,834 and
Speaker:14,113, respectively.
Speaker:Iron ore has reversed its negative spiral of the past weeks, the
Speaker:62% index recovering from $102.25
Speaker:on Tuesday, the second to $107.55
Speaker:yesterday, up 5% for fuel oils.
Speaker:So moves on the high sulfur fuel oil, up
Speaker:13% to $492.07, much
Speaker:less of a move on the lower sulfur Singapore fuel, only up barely
Speaker:one dollar to six hundred thirty three dollars, fifty cents.
Speaker:And now let's talk dry free with Ben Klang. So
Speaker:Ben, Panamaxes are my personal favorite bulk
Speaker:carrier because they remind me of my favorite palindrome, but you
Speaker:strike me as the supermax person. Hi Fernando. Well,
Speaker:it's funny you say that because that's where all of my freight career started
Speaker:200 years ago, but I love all my children equally.
Speaker:But on a serious note, it depends on what you want to achieve. They
Speaker:all have their own charm, for example, because of its roots and it's
Speaker:small numbers of different cargo as cape carries.
Speaker:Some use it as a proxy for the chinese industrial growth and so
Speaker:on. So it all depends what you would like to achieve. Well, it sounds like
Speaker:capes have been quite the ride recently. What's going on with
Speaker:them? Yes, capes, over the time
Speaker:since our last podcast, which was basically two weeks ago, now,
Speaker:almost has really felt like the moment on the roller coaster.
Speaker:You know, when you dropped from the main high and left your stomach where you
Speaker:start falling. We basically seen weaker cargo order
Speaker:volumes across all the major basins, which has contributed
Speaker:to the general negative sentiment, fundamentally
Speaker:speaking. And we saw on the close 27
Speaker:March, basically just before the Easter break, front month April
Speaker:was trading at 23 7.50 in volume, then traded
Speaker:down to 19,000 earlier this week to close
Speaker:last night at 20 and a quarter. That being said, what's been
Speaker:interesting down the curve is that the rates has been less
Speaker:affected by this negative sentiment. Q two came back after the
Speaker:Easter break at 25 500, trading to a low of
Speaker:23 7.50 before moving back to 24
Speaker:625 yesterday. Cal 25, on the other hand, was
Speaker:slightly up, having moved from 19 750 last
Speaker:Tuesday to 23 seven five yesterday.
Speaker:On the Panamax. They also came under pressure last week,
Speaker:not surprisingly, on the prompt month, April and May slipped
Speaker:to 14 615
Speaker:750 lows respectively, on Tuesday
Speaker:last week edging down to 14 two and
Speaker:15 3.75. You know, this negative sentiment, just
Speaker:like the Capes, was less pronounced in the latter months. Q two of
Speaker:the week was only down a few hundred bucks to around
Speaker:15,000. Cal 25 basically on a non
Speaker:move at 13.3. And last but not
Speaker:least, the supermaxes. There was this mirror
Speaker:trend of the larger ships. Last Wednesday was the
Speaker:positive day that helped rates move up week on week.
Speaker:April moved up to dollar 500 to yesterday's
Speaker:close at 14 3.75. Q two up to
Speaker:14,650 and Cal 25 was flattish
Speaker:at twelve seven seven five.
Speaker:So Ben, what's been happening volume wise this week? We
Speaker:had nearly 42,300 lots cleared on
Speaker:futures and 4300 lots on options
Speaker:last week. That's lower than usual. But
Speaker:as you know, yes, it was a four day weekend due to the Easter
Speaker:holiday. The majority of the volume was on the larger
Speaker:sizes. Capes and Panamax's futures trading saw
Speaker:around 3890 lots and
Speaker:3020 lots per day last week. Supermaxers
Speaker:followed behind with an average of twelve. 140 lots
Speaker:traded daily last week and it was a subdued week
Speaker:for options, with 900 lots and
Speaker:3400 loss being cleared on the Capes and
Speaker:Panamaxes respectively. And as we moved on to this week,
Speaker:more activity shifted to the Q three contract along with the
Speaker:primary contracts, April Q two and Cal 25
Speaker:open. Interest increased as position extended to further
Speaker:months. In addition, we saw decent interest
Speaker:on the voyage route c five, with
Speaker:2.85 million tonnes traded on the front month
Speaker:April and May contracts. Amazing. Ben,
Speaker:I could listen to you read the phone book. Seriously, it's just the most
Speaker:soothing freight update I've ever heard. Thank you so
Speaker:much for that. And I'm excited to see where this tape roller coaster
Speaker:takes us next. Thank you very much, Fernanda.
Speaker:And now let's talk about iron ore with how pay. The thing on
Speaker:my mind is this iron ore rebound that we've seen in the last few
Speaker:days. Is there any particular reason for the optimism? When
Speaker:we talk about iron on rebound, we have to brand our research
Speaker:like we probably the very earliest people to
Speaker:predict or to have market views about this
Speaker:rebound in as early as late March because we
Speaker:saw a recovery on iron usage. And
Speaker:on the other side we also saw improving orders. On the
Speaker:steel side, we also evaluate projects. They're
Speaker:not growing projects comparing to the same
Speaker:period of last year or two years ago, but
Speaker:the total amount, the size is still there. So
Speaker:we're saying the demand is probably coming late instead of total
Speaker:vanishing. We're thinking if iron ore correct deep
Speaker:enough we all see a rebound. It's either slow rebound or
Speaker:a big rebound. We definitely won't seeing that it's dropping
Speaker:forever. And I think on the news side
Speaker:we're hearing that one of the biggest news china
Speaker:decrease the roof of loan plan rate.
Speaker:So let's see this example. Let's say if the mortgage rate
Speaker:is 4% normally for banks they normally
Speaker:set like a roof rate of 4% and the
Speaker:ceiling rates let's say 4.1 but now they're taking
Speaker:the 4% roof rate out which means some of the commercial
Speaker:banks, some of the local banks they can offer as low
Speaker:as they can afford for example they can offer as low as
Speaker:3.5%. So that's a big news to house
Speaker:buyers. So the market think it's stimulus on the housing
Speaker:area. So that's two big things happen on the
Speaker:market and moreover we have to say the global
Speaker:market is playing the risk off sentiment. We
Speaker:saw the crazy oil and crazy gold and
Speaker:everything else in the metal sector witnessed a huge
Speaker:growth in the beginning of April. So the
Speaker:pharaohs have to be one of the other sector
Speaker:but it's also supported also following those
Speaker:growth at the commodity and I think those
Speaker:are the major factors behind this big
Speaker:growth in the last two days. Well
Speaker:it makes sense why one of our reports was called ahead of the curve then
Speaker:because you really are Halloween. So my next question is a bit of a
Speaker:toughie but do you think this trend is sustainable?
Speaker:I think the rebound will be sustainable at
Speaker:least for a couple of weeks or even months left
Speaker:because we're seeing like a lot of indicators
Speaker:on iron on market is improving. Like for example the
Speaker:big iron consumption is growing up and this growth is
Speaker:not like taking one week or two from historical study.
Speaker:The growth on each one for the big iron usage is normal
Speaker:for the trajectory it's going up and it's going up for seven
Speaker:to eight weeks and now it's coming down or mint and
Speaker:at a certain level so we will see a marginal improving
Speaker:on the demand side for more than two months in the falling two
Speaker:months or even three months. So on the price side won't
Speaker:probably like going up for the entire three
Speaker:months but it has positive supports from
Speaker:the fundamental side. And moreover we're
Speaker:seeing, we're seeing the spread level, we're seeing the spread
Speaker:structure is flat. When the spread structure is flat it's
Speaker:normally signal that the commodity
Speaker:is somewhere close to the bottom of the
Speaker:valuation. And the other good news is the
Speaker:steel margin. We're seeing the virtual steel margin in China
Speaker:mentioned at 40 yuan. Bhutan, which is historically low level
Speaker:for almost the entire q one, but it suddenly jumped
Speaker:from 41% to 212
Speaker:grand on this Monday and Tuesday. So
Speaker:there were a huge growth on the margin side, which
Speaker:gave the steel mills enough room to buy
Speaker:raw materials. I think last but not least, let's
Speaker:watch the global market, see if there's a
Speaker:depreciation on us dollars or on the other side,
Speaker:if the metal sector maintains strong, so which
Speaker:can all become very strong support for the
Speaker:iron market as well. Well, how? It sounds like we're just going to have
Speaker:to wait and see, but luckily we have you to do that for
Speaker:us. So thank you so much for your update,
Speaker:Hal. It's been an absolute pleasure. Thank you.
Speaker:Archie, how are you doing? I'm good, thank you. How are you
Speaker:doing? Good. Last episode. Last episode. Very,
Speaker:very sad. What a journey it's been. Yeah. The end of an era.
Speaker:But the people's broker will go on, so that's all that matters. The
Speaker:show must go on, Fernanda. Absolutely. So let's dive on in
Speaker:here with the big headline here.
Speaker:Crude has broken the upside of this year's range and rallied
Speaker:above $90. Can you give us a bit of insight into what's
Speaker:going on? Yeah, I mean, this month has been a lot more
Speaker:exciting for the crude. After what was a really range bound Q one, that front
Speaker:month contract traded like a five, well, maybe not even a five dollar range for
Speaker:Q one. It was kind of 83 to 87, whatever it was. And
Speaker:so for it to finally actually have a bit of direction, it's been quite exciting
Speaker:for us. There's obviously the persistent factors of the geopolitical
Speaker:tensions in the Middle east that's added to the fire
Speaker:as well as this. I think the market's actually really starting to
Speaker:feel that tightness in the supply from the OPEC
Speaker:cuts. Obviously, OPEC were cut in production all
Speaker:the second half of last year into this year. And now I think the market's
Speaker:really starting to feel it. I know a few people in the market said that
Speaker:OPEC have very much regained control of oil
Speaker:prices, which is obviously what the cuts set out to do. Right. OPEC said that
Speaker:their production cuts are going to continue into Q two of this year, so that's
Speaker:bolstered prices. And then obviously there's been the ongoing
Speaker:issues in the Middle east, which on that, contrarily
Speaker:have also offered some downside pressure on the
Speaker:days where news has reported, oh, you know, ceasefire
Speaker:talks are making some progression. We've seen prices come off, but, you know, then
Speaker:it's all very mixed news on that front. You know, one day it's, oh,
Speaker:ceasefire talks are making progression and then the next day it's all one of the
Speaker:parties, whether it's Israel or Hamas, have rejected a ceasefire
Speaker:deal and then markets go back up. So it's all kind of here and
Speaker:there on that front. But it definitely seems like for the moment, crude prices are
Speaker:on the up. Sing spreads are coming off in the front. Why is that?
Speaker:Yeah. So on the fuel side of things, we've seen
Speaker:a lot. Well, on the low sulfur Singh spreads, the 0.5
Speaker:stuff, theyre really tight in the front. Contracts gone down to like
Speaker:$2 sub $2 in the high self stuff. Its
Speaker:actually got into the negative territory. Id say the main reason for this is,
Speaker:and what were hearing from some physical traders in Singapore is that theres ample
Speaker:supply in the Singapore ports which is making the
Speaker:stuff in the front a lot cheaper. Were also seeing
Speaker:front cracks come off a little bit and a little bit
Speaker:of lack of liquidity. I think theres been a lot of, theres been a couple
Speaker:of Singh holidays this month. Theres one actually today. Theres less
Speaker:flow going through the market. As you can see. The prices come off a little
Speaker:bit. But I think, yeah, theyre definitely one to watch. Its
Speaker:not ideal for those who have exposure hedge that are
Speaker:looking to roll it to the next month because youre getting less
Speaker:bang for your buck there. It begs the question, do we hit the floor
Speaker:here with the May June seeing spreads and bounce back up later
Speaker:in the month? Who knows? But yeah, theyre certainly very, very narrow at the
Speaker:minute. Well, Archie, stick a fork in you. I think you're
Speaker:done. Yeah. Oh, man. Well, it's been
Speaker:an absolute pleasure to work with you over the past
Speaker:year, Arch. It has a sad news that this is your last
Speaker:one. Honestly, it's definitely very bittersweet.
Speaker:Well, that's it for this week. Thank you so much for joining us. And make
Speaker:sure to subscribe by clicking the subscribe button wherever you get your
Speaker:podcast from. Also make sure you're following us on LinkedIn
Speaker:or get signed up for our FIS live app to make sure that you never
Speaker:miss any freight and commodity analysis from FIS. It has
Speaker:been an honor to serve as your host over the past year.
Speaker:I'd like to thank Neil Veglio, our show producer, for bringing the
Speaker:glamour to our show. And ultimately, I'd like to thank you
Speaker:for joining me as I learned to navigate the Sea of Brayton
Speaker:commodities. Catch you later. Thanks again for joining us, and see you in a
Speaker:couple of weeks time on FIS's Freight and commodity podcast. Freight
Speaker:up, freight up.