Welcome back to "Freight Up," your go-to podcast for insights into the major freight and bulk commodity markets from FIS.
I'm your host, Davide, and it's time once again for the latest updates and movements in major freight and bulk commodity markets.
Joining us are Hao Pei from Shanghai to discuss the iron ore market and Archie Smith, who will break down the fuel oil sector.
We'll be covering everything from the recent dip in the US unemployment rate and China's inflation trends to fluctuations in iron ore and fuel oil prices.
Listen for insights on market movements, coal demand, and the latest data impacting our industry.
Don't forget to follow the podcast and our company page on LinkedIn, and download our FIS Live app to stay ahead with the freshest freight and commodity analysis.
Let's get started!
Timestamped summary
00:00 Shipping rates fluctuate, handysize index remains flat.
05:25 Futures prices and open interest continue to rise.
08:30 Attempting to persuade market on resilient iron ore demand in China.
12:15 Trump's impact on oil market, weak China imports.
Freight up hello and welcome back to
Speaker:freight up. My name is Davide and today I will be your host
Speaker:as we navigate together our major freight and bulk commodity
Speaker:markets. In these episodes, we're going to have a regular
Speaker:update on dry freight. Haupei from Shanghai will tell
Speaker:us more about the iron ore and Archie Smith will be back
Speaker:in the booth together with us to give us these latest news on the
Speaker:fuel oil markets. But as usual, lets first look at the
Speaker:latest news and the index movements since our last
Speaker:episode. The unemployment rate in
Speaker:the United States rose to 4.1% in
Speaker:June, hitting the highest figure since November
Speaker:2021, up from 4% in the previous
Speaker:month and surpassing market expectations which had
Speaker:forecasted the rate to remain unchanged. The us core
Speaker:consumer price index, which excludes volatile
Speaker:items such as food and energy, rose by
Speaker:0.1% from the previous month in June. The annual
Speaker:figure fell instead to a three year low to
Speaker:3.3% in June, down from 3.4%
Speaker:of the previous month. In China, inflation went down
Speaker:0.2% in June from 0.3% in the prior
Speaker:two months, falling short of market estimates of
Speaker:0.4%. It was the fifth straight month of
Speaker:consumer inflation, but the lowest figure since
Speaker:March. The chinese economy expanded
Speaker:4.7% year on year in the second quarter of
Speaker:2024, missing the market's expectations of
Speaker:5.1% and easing from the
Speaker:5.3% of the first quarter.
Speaker:Let's take a look at the market movements of the last
Speaker:two weeks. Iron ore was quite flat over
Speaker:the past week especially, but has gone down $3 from the high
Speaker:of 110 and $0.55 which were registered on
Speaker:the 2 July. On the fuel oils front, both the Sync
Speaker:380 and the zero five have dropped. The first one
Speaker:lost $7.81 and the second
Speaker:$27 going from
Speaker:$627.61 to nearly
Speaker:$600. Cape size have dropped to below the
Speaker:30,000 threshold again and the C five
Speaker:Tc went down from 32,002 weeks ago
Speaker:to $25,700 yesterday.
Speaker:Panamaxes and supramaxes over the last fortnight have
Speaker:been in thousand dollars range between high
Speaker:14,000 up to the 15,000.
Speaker:Lastly, the handysize index has been flatter than a
Speaker:two week old bottle of coke, hovering around the $13,300
Speaker:$13,500 range.
Speaker:Let's now look at the latest news in the drive freight market more in
Speaker:depth. Last week saw the key prompt rates fluctuate daily
Speaker:but overall closed higher than it opened despite the index
Speaker:declining by about 1.3% last Tuesday, the
Speaker:market observed the weak lows post index, which lost
Speaker:$1,302 to 25,069
Speaker:due to a rise in tonnage supply in the Atlantic. July and
Speaker:August traded down to 25,750 and
Speaker:24,300, respectively. Rates shifted back
Speaker:up on Wednesday and then down again on Thursday before reaching
Speaker:the weeks high on Friday, with July at
Speaker:$27,200 and volume calming at
Speaker:28,000 for Q four. For the Panamaxes,
Speaker:sentiment appeared to have shifted following the three consecutive
Speaker:weeks of losses. Monday was range bound and
Speaker:flat to the previous Friday, but by a large rates
Speaker:increased throughout the day, with July and August up to
Speaker:$13,250 and 14,250,
Speaker:respectively. The prompts continued to push up throughout the week
Speaker:and renewed demand for grains and coal from the north Atlantic
Speaker:drove the rates up on Wednesday. July and August trade up to
Speaker:14,015 thousand, while further out coal 25
Speaker:traded up to 13,700 and on Friday, July and
Speaker:August closed at $14,000 and
Speaker:$14,175, respectively. For the
Speaker:supermaxes, a generally positive week on the prompts. While
Speaker:the spot price was much flatter, Tuesday was the best
Speaker:day by volume and alongside the positive index,
Speaker:$149 up to 14,818,
Speaker:saw August and Q three reach highs of 15,000
Speaker:and $15,100, respectively. By Friday
Speaker:it was comparatively quieter, but rates remained solid throughout the
Speaker:day. July and August reached new highs of 15,225
Speaker:and 15,650, respectively.
Speaker:Volume wise now keepsize and Panamax captured the most
Speaker:interest, averaging 3320 lots and
Speaker:4000 lots per day, while Supramax followed with daily
Speaker:averages of 1630 lots in the
Speaker:option markets. Instead, capesize continued to lead with a weekly total
Speaker:of 2400 lots traded, adding
Speaker:360 lots traded for supermax. Alongside
Speaker:the rise in future prices, open interest has also continued to increase,
Speaker:especially for the Panamax four TC, suggesting perhaps
Speaker:as bullish sentiment and a buildup of lot positions. As
Speaker:of July 15, open interest for the Cape five
Speaker:tc stood at
Speaker:167,302, which is
Speaker:3520 week on week increase Panamax
Speaker:four dc at
Speaker:165,037 plus
Speaker:4020 still week on week, and supermax ten
Speaker:dc at 74,800 going
Speaker:up 1700 week on week.
Speaker:Lastly, regarding the voyage routes, large volume change
Speaker:hands in the c five market last week with
Speaker:3670 5 million tons
Speaker:traded on prime contracts for July and August alongside
Speaker:60 kt on Q 125 and 90 kt
Speaker:traded on August 25. But don't forget that you can read these
Speaker:analysis and actually many more on all the markets that we
Speaker:serve and not only on the markets but also on the many commodities
Speaker:that we look at on our FIS Live app.
Speaker:You can register on the app if you haven't registered yet on the
Speaker:dedicated page on our website
Speaker:freightinvestors.com.
Speaker:and now we have Hao Pei, our senior analyst from our Shanghai
Speaker:office. Hao thank you very much for joining us again. How are you doing? Good,
Speaker:good. How are you today? Not too bad, not too bad. I can't complain.
Speaker:So on the iron ore front we have seen,
Speaker:I have to say quite a boring week. So is there something
Speaker:exciting happening? What can we expect for the coming weeks? What's your
Speaker:opinion on that? I mean iron ore index was almost
Speaker:flat around 108 for the entire week as
Speaker:we expected from last couple of reports. And iron
Speaker:ore generally maintained neutral from June for most of the time.
Speaker:Iron ore just consolidated from 105 to 110.
Speaker:That's within $5. And I think on the short
Speaker:side there is high arrivals of iron ores and
Speaker:high port stocks and it and slower downstream
Speaker:activities because of extreme hot weather and heavy
Speaker:rain in China and also monsoon season in
Speaker:India and the margin level of steels is
Speaker:extremely low and there's also slower
Speaker:sales flat steels because of using up
Speaker:for quota and waiting for new improvement in european
Speaker:areas. So all became bearish
Speaker:indicators and however all of them hadn't really
Speaker:changed from June to July. So that's why the market
Speaker:wasn't really trade on those factors back
Speaker:and forth so they all priced in. On the other
Speaker:hand I think the slow decrease in iron
Speaker:consumption is support iron ore
Speaker:demand market. So which is trying to persuade the market
Speaker:the iron ore demand is still resilient compared to last couple
Speaker:of years. The market is now focusing
Speaker:on the third planet in China but
Speaker:yet we haven't seen any excitement from the
Speaker:planet yet. We haven't really seen any
Speaker:materialized or booming news from the planet
Speaker:and riotous they expect there will be an interest
Speaker:cut somewhere in July but there's not
Speaker:yet. I read some of economic articles saying
Speaker:there will be some housing strategies and
Speaker:but from my personal view I think it
Speaker:shouldn't be any surprise from the side because China
Speaker:has launching quite big
Speaker:stimulus and house decreasing down payment
Speaker:and removing some of the qualifications of buying
Speaker:from the stern. So even if something come
Speaker:out it shouldn't be surprising. So I'm looking for some
Speaker:other confident words or other
Speaker:infrastructure projects instead of housing from my personal
Speaker:view so then it could probably impact iron
Speaker:ore instead of just the housing sector. So but
Speaker:anyway we're on track of that. Thank you. How
Speaker:and on the coking call like we have seen like a
Speaker:drop on the fob cogging call. That was around like
Speaker:7.1% last week. Maybe you can tell us a little bit
Speaker:more about what happened there. I think, first of all, the
Speaker:trade of Anglo American cut an output called an
Speaker:end because Anglo sent a reduction of output on
Speaker:that miner previously. So, which is included in
Speaker:the short production caused by the force majeure.
Speaker:And moreover, buyers decreased forefront cargoes.
Speaker:There are crowded cargo lakers for June,
Speaker:July and August, and it's been very
Speaker:crowded in asian area, asian and Australia area, so which
Speaker:means significant oversupply. And we've seen a
Speaker:lot of reselling ligands in South Asia.
Speaker:So that means, generally means the mills are,
Speaker:the stock levels are high. So I think the
Speaker:oversupply will cause a
Speaker:continuous drop on the price. So even we
Speaker:saw a 7% drop. But personally, I think that's probably
Speaker:not enough in the next few weeks. Thank you very much,
Speaker:Hal.
Speaker:And now let's talk about fuel oil with Archie's meat. Archie, welcome
Speaker:back. How you doing? I've missed it. Now, remember that we spoke last
Speaker:time and then you gave us your prediction about the euros. You
Speaker:got one of the two. Unfortunately, not Portugal.
Speaker:Not Portugal. There we go. Well, let's move from football
Speaker:to another area of expertise of yours, which is
Speaker:fuel oil. Tell us something about the direction of the crude oil. I mean,
Speaker:like, how is it feeling at the moment? How's it going? Definitely we're
Speaker:feeling softer. Sentiment is bearish. We're coming
Speaker:off of the sort of recent highs of around the 87 mark on the
Speaker:front month. Brent crude future, we've kind of gone sub 84 today.
Speaker:And I think a lot of this is down to
Speaker:kind of poor sentiment and poor data out of China. Obviously
Speaker:China, second biggest economy in the world. So when it comes
Speaker:to market sentiment, you know, a lot of
Speaker:participants look towards China and us. Obviously, us
Speaker:is well in the full flow of elections at the minute. I think that
Speaker:will have an impact on the market. If Donald Trump gets in, that is a
Speaker:man that can move prices of oil. But, yeah, I mean, looking at China, there
Speaker:was some pretty weak import data that came out earlier this
Speaker:week showing an annual fall of 11% of
Speaker:crude imports to 46.45 million
Speaker:tonnes in June. And that extends also from last month with a fall
Speaker:of 8.7% on the year as well. And I think that's why crude is feeling
Speaker:softer. I mean, yeah, you could say. Obviously, API data came out of the US
Speaker:last night, which showed a drawback in us crude stockpiles,
Speaker:which is fundamentally quite bullish but it's not
Speaker:really had an effect on the market this morning. And I think that also
Speaker:goes to say that market participants look
Speaker:more at the EIA data, which comes out later today, which
Speaker:effectively shows the same thing as the API data, which is the us
Speaker:infantry levels on crude distillates, et cetera, et cetera. But the EIA is,
Speaker:well, definitely seems more trusted and more credible because the market reacts
Speaker:a lot more sensitively to the EIA than it does the API. But the API
Speaker:did show a drawback of about 4 million barrels of crude. But, but again, we
Speaker:have seen, I mean, crudes off about half a percent this morning.
Speaker:So it definitely seems as though the weak sentiment in China is
Speaker:the dominant force in play here over kind of some
Speaker:us strength. And on the
Speaker:HSA four, on the east west, I mean, like, what's happening?
Speaker:What happened actually this month since the last time that we spoke, it's kind. Of
Speaker:going strength to strength at the minute. Earlier in the month, it was kind of
Speaker:trading around the 15 $16 per metric time level, meaning
Speaker:that the sing 380 grade is trading at
Speaker:$16 premium to the european equivalent. That's kind of gradually
Speaker:increased. And this morning is trading around the $23 per metric
Speaker:ton mark. I mean, fundamentally, I'd argue that it's
Speaker:Middle east, kind of hitting its peak summer demand season
Speaker:for power generation. They use the Sync 380 fuel oil for a lot of
Speaker:power generation, for cooling, et cetera, et cetera. I mean, it's ridiculous over there. I've
Speaker:heard it's like 50 degrees celsius in Dubai at the minute, so I could literally
Speaker:cook you alive. I would say that this is kind of the reason that we're
Speaker:seeing the sing 380 pull away from the Rotterdam high sulfur
Speaker:barges, hence extending that east west value. Okay,
Speaker:thank you very much, Archie. We'll see you again. Thank you. Cheers. Good to be
Speaker:back. Cheers. And that is it for this
Speaker:week. Make sure to subscribe by clicking on the subscribe button
Speaker:on wherever you get your podcast from. And also make sure to follow us
Speaker:on LinkedIn or get signed up to our app fis live to
Speaker:make sure you never miss any freight and commodity analysis from
Speaker:FIS. Thanks again for joining me, and we will see
Speaker:you in two weeks time on the Fiss Freight commodity
Speaker:podcast. Freight up.