Iron Ore Stays Flat - Fuel Oil Drops: Mid-July Analysis

Freight up hello and welcome back to

freight up. My name is Davide and today I will be your host

as we navigate together our major freight and bulk commodity

markets. In these episodes, we're going to have a regular

update on dry freight. Haupei from Shanghai will tell

us more about the iron ore and Archie Smith will be back

in the booth together with us to give us these latest news on the

fuel oil markets. But as usual, lets first look at the

latest news and the index movements since our last

episode. The unemployment rate in

the United States rose to 4.1% in

June, hitting the highest figure since November

2021, up from 4% in the previous

month and surpassing market expectations which had

forecasted the rate to remain unchanged. The us core

consumer price index, which excludes volatile

items such as food and energy, rose by

0.1% from the previous month in June. The annual

figure fell instead to a three year low to

3.3% in June, down from 3.4%

of the previous month. In China, inflation went down

0.2% in June from 0.3% in the prior

two months, falling short of market estimates of

0.4%. It was the fifth straight month of

consumer inflation, but the lowest figure since

March. The chinese economy expanded

4.7% year on year in the second quarter of

2024, missing the market's expectations of

5.1% and easing from the

5.3% of the first quarter.

Let's take a look at the market movements of the last

two weeks. Iron ore was quite flat over

the past week especially, but has gone down $3 from the high

of 110 and $0.55 which were registered on

the 2 July. On the fuel oils front, both the Sync

380 and the zero five have dropped. The first one

lost $7.81 and the second

$27 going from

$627.61 to nearly

$600. Cape size have dropped to below the

30,000 threshold again and the C five

Tc went down from 32,002 weeks ago

to $25,700 yesterday.

Panamaxes and supramaxes over the last fortnight have

been in thousand dollars range between high

14,000 up to the 15,000.

Lastly, the handysize index has been flatter than a

two week old bottle of coke, hovering around the $13,300

$13,500 range.

Let's now look at the latest news in the drive freight market more in

depth. Last week saw the key prompt rates fluctuate daily

but overall closed higher than it opened despite the index

declining by about 1.3% last Tuesday, the

market observed the weak lows post index, which lost

$1,302 to 25,069

due to a rise in tonnage supply in the Atlantic. July and

August traded down to 25,750 and

24,300, respectively. Rates shifted back

up on Wednesday and then down again on Thursday before reaching

the weeks high on Friday, with July at

$27,200 and volume calming at

28,000 for Q four. For the Panamaxes,

sentiment appeared to have shifted following the three consecutive

weeks of losses. Monday was range bound and

flat to the previous Friday, but by a large rates

increased throughout the day, with July and August up to

$13,250 and 14,250,

respectively. The prompts continued to push up throughout the week

and renewed demand for grains and coal from the north Atlantic

drove the rates up on Wednesday. July and August trade up to

14,015 thousand, while further out coal 25

traded up to 13,700 and on Friday, July and

August closed at $14,000 and

$14,175, respectively. For the

supermaxes, a generally positive week on the prompts. While

the spot price was much flatter, Tuesday was the best

day by volume and alongside the positive index,

$149 up to 14,818,

saw August and Q three reach highs of 15,000

and $15,100, respectively. By Friday

it was comparatively quieter, but rates remained solid throughout the

day. July and August reached new highs of 15,225

and 15,650, respectively.

Volume wise now keepsize and Panamax captured the most

interest, averaging 3320 lots and

4000 lots per day, while Supramax followed with daily

averages of 1630 lots in the

option markets. Instead, capesize continued to lead with a weekly total

of 2400 lots traded, adding

360 lots traded for supermax. Alongside

the rise in future prices, open interest has also continued to increase,

especially for the Panamax four TC, suggesting perhaps

as bullish sentiment and a buildup of lot positions. As

of July 15, open interest for the Cape five

tc stood at

167,302, which is

3520 week on week increase Panamax

four dc at

165,037 plus

4020 still week on week, and supermax ten

dc at 74,800 going

up 1700 week on week.

Lastly, regarding the voyage routes, large volume change

hands in the c five market last week with

3670 5 million tons

traded on prime contracts for July and August alongside

60 kt on Q 125 and 90 kt

traded on August 25. But don't forget that you can read these

analysis and actually many more on all the markets that we

serve and not only on the markets but also on the many commodities

that we look at on our FIS Live app.

You can register on the app if you haven't registered yet on the

dedicated page on our website

freightinvestors.com.

and now we have Hao Pei, our senior analyst from our Shanghai

office. Hao thank you very much for joining us again. How are you doing? Good,

good. How are you today? Not too bad, not too bad. I can't complain.

So on the iron ore front we have seen,

I have to say quite a boring week. So is there something

exciting happening? What can we expect for the coming weeks? What's your

opinion on that? I mean iron ore index was almost

flat around 108 for the entire week as

we expected from last couple of reports. And iron

ore generally maintained neutral from June for most of the time.

Iron ore just consolidated from 105 to 110.

That's within $5. And I think on the short

side there is high arrivals of iron ores and

high port stocks and it and slower downstream

activities because of extreme hot weather and heavy

rain in China and also monsoon season in

India and the margin level of steels is

extremely low and there's also slower

sales flat steels because of using up

for quota and waiting for new improvement in european

areas. So all became bearish

indicators and however all of them hadn't really

changed from June to July. So that's why the market

wasn't really trade on those factors back

and forth so they all priced in. On the other

hand I think the slow decrease in iron

consumption is support iron ore

demand market. So which is trying to persuade the market

the iron ore demand is still resilient compared to last couple

of years. The market is now focusing

on the third planet in China but

yet we haven't seen any excitement from the

planet yet. We haven't really seen any

materialized or booming news from the planet

and riotous they expect there will be an interest

cut somewhere in July but there's not

yet. I read some of economic articles saying

there will be some housing strategies and

but from my personal view I think it

shouldn't be any surprise from the side because China

has launching quite big

stimulus and house decreasing down payment

and removing some of the qualifications of buying

from the stern. So even if something come

out it shouldn't be surprising. So I'm looking for some

other confident words or other

infrastructure projects instead of housing from my personal

view so then it could probably impact iron

ore instead of just the housing sector. So but

anyway we're on track of that. Thank you. How

and on the coking call like we have seen like a

drop on the fob cogging call. That was around like

7.1% last week. Maybe you can tell us a little bit

more about what happened there. I think, first of all, the

trade of Anglo American cut an output called an

end because Anglo sent a reduction of output on

that miner previously. So, which is included in

the short production caused by the force majeure.

And moreover, buyers decreased forefront cargoes.

There are crowded cargo lakers for June,

July and August, and it's been very

crowded in asian area, asian and Australia area, so which

means significant oversupply. And we've seen a

lot of reselling ligands in South Asia.

So that means, generally means the mills are,

the stock levels are high. So I think the

oversupply will cause a

continuous drop on the price. So even we

saw a 7% drop. But personally, I think that's probably

not enough in the next few weeks. Thank you very much,

Hal.

And now let's talk about fuel oil with Archie's meat. Archie, welcome

back. How you doing? I've missed it. Now, remember that we spoke last

time and then you gave us your prediction about the euros. You

got one of the two. Unfortunately, not Portugal.

Not Portugal. There we go. Well, let's move from football

to another area of expertise of yours, which is

fuel oil. Tell us something about the direction of the crude oil. I mean,

like, how is it feeling at the moment? How's it going? Definitely we're

feeling softer. Sentiment is bearish. We're coming

off of the sort of recent highs of around the 87 mark on the

front month. Brent crude future, we've kind of gone sub 84 today.

And I think a lot of this is down to

kind of poor sentiment and poor data out of China. Obviously

China, second biggest economy in the world. So when it comes

to market sentiment, you know, a lot of

participants look towards China and us. Obviously, us

is well in the full flow of elections at the minute. I think that

will have an impact on the market. If Donald Trump gets in, that is a

man that can move prices of oil. But, yeah, I mean, looking at China, there

was some pretty weak import data that came out earlier this

week showing an annual fall of 11% of

crude imports to 46.45 million

tonnes in June. And that extends also from last month with a fall

of 8.7% on the year as well. And I think that's why crude is feeling

softer. I mean, yeah, you could say. Obviously, API data came out of the US

last night, which showed a drawback in us crude stockpiles,

which is fundamentally quite bullish but it's not

really had an effect on the market this morning. And I think that also

goes to say that market participants look

more at the EIA data, which comes out later today, which

effectively shows the same thing as the API data, which is the us

infantry levels on crude distillates, et cetera, et cetera. But the EIA is,

well, definitely seems more trusted and more credible because the market reacts

a lot more sensitively to the EIA than it does the API. But the API

did show a drawback of about 4 million barrels of crude. But, but again, we

have seen, I mean, crudes off about half a percent this morning.

So it definitely seems as though the weak sentiment in China is

the dominant force in play here over kind of some

us strength. And on the

HSA four, on the east west, I mean, like, what's happening?

What happened actually this month since the last time that we spoke, it's kind. Of

going strength to strength at the minute. Earlier in the month, it was kind of

trading around the 15 $16 per metric time level, meaning

that the sing 380 grade is trading at

$16 premium to the european equivalent. That's kind of gradually

increased. And this morning is trading around the $23 per metric

ton mark. I mean, fundamentally, I'd argue that it's

Middle east, kind of hitting its peak summer demand season

for power generation. They use the Sync 380 fuel oil for a lot of

power generation, for cooling, et cetera, et cetera. I mean, it's ridiculous over there. I've

heard it's like 50 degrees celsius in Dubai at the minute, so I could literally

cook you alive. I would say that this is kind of the reason that we're

seeing the sing 380 pull away from the Rotterdam high sulfur

barges, hence extending that east west value. Okay,

thank you very much, Archie. We'll see you again. Thank you. Cheers. Good to be

back. Cheers. And that is it for this

week. Make sure to subscribe by clicking on the subscribe button

on wherever you get your podcast from. And also make sure to follow us

on LinkedIn or get signed up to our app fis live to

make sure you never miss any freight and commodity analysis from

FIS. Thanks again for joining me, and we will see

you in two weeks time on the Fiss Freight commodity

podcast. Freight up.