Speaker: 00:00:00

Jonathan Gaylor discusses why he feels bullish on LNGs and

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after his segment, you might too. In Ferris Complex news,

Speaker: 00:00:07

China coking coal futures increased by

Speaker: 00:00:09

8.13% over two trading days. Hao

Speaker: 00:00:13

Pay is here to discuss what happened. If you have questions about the

Speaker: 00:00:17

EU ETS, I did too. So I brought in Hugh Taylor

Speaker: 00:00:21

and Luke Hanley from our EU ETS consultancy to give me some

Speaker: 00:00:24

answer, others all this and more on Freight Up. Freight up.

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Hello, and welcome to freight up. My name's Fernanda and I'll be your host as

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we navigate the seas of freight and commodities. This week's episode FIS a

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bit of a long one. So grab some popcorn, go out for a run,

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do whatever you need to do, because it is a good

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one. This week we're joined by Navigates, Jonathan Gaylor

Speaker: 00:00:48

FIS's very own EU ETS consultants hugh

Speaker: 00:00:51

Taylor and Luke Hanley. A Smith seven.

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And how pay? So let's dive on in

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here's. Navigate's jonathan gaylor. So we are in the

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booth with Jonathan Gaylor from Navigate.

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Jonathan, how are you doing? I'm very good, how are you? Very well, thank you

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for inviting me. Oh, so excited to have you. Welcome to where the

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magic happens for the frayed up community. So you

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are the LNG guy? Apparently so.

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Apparently so. Would you please tell the freight up community

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a bit about yourself? Sure. I'm currently working at Navigate, working

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as a business manager, alternative fuels manager for the wider

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group. I work alongside the bunker trading company as well called

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Integrate, trying to head up a bit more of the trade on the LNG side.

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Before that, my background was predominantly also in the LNG

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alternative fuel space. I worked for eight years for Affinity

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Shipping, a shipbroking company also located not far from

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here, and basically forming new LNG bunker

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hubs on a commercial basis. And before that, my background was slightly

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different, it was geological. So it's a bit of a shift. Jack

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of many trades. Yeah, well, the oil price went down, so I had to find

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another job outside of oil in geology. Oh,

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my goodness. I love it. And your time at the ship broker explains why the

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screaming outside didn't deter you. Exactly. Is that home for

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me background, though? You were like

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home. I guess the

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first question I have is a bit of a two parter and that's

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what are the difficulties that you've seen so far in the LNG

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space? And tell us a bit more about the journey of other

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alternative fuels. Everyone's focused on alternative fuels. We should

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be looking at a wider portfolio of fuels from the start. So this is not

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a case of LNG is the one, this is just more of a case of

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coming from, I would say more of a commercial background. What are the

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challenges that we face, particularly in the shipping industry, moving to these

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fuels? Everyone likes to talk about ammonia, methanol

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and hydrogen, but we're just simply not there yet. If we're looking from

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the trading side, from the freight side, we have to look at fuels that are

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available today and within quantity to be able to

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actually bunker. Hence why I'm probably a bit

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bullish today on LNG, but I like to think of

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let's do stuff today rather than let's talk about ten years ahead. So I

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would say the challenges that we face, mainly that there's technical

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challenges always at play. They're currently looking at that in ammonia, they're looking

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at that in methanol. The technical ones are kind of

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overcome now thanks to the likes of SGMF, Society of Gas,

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Marine Fuel and some of the majors that have really implemented the

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bunkering to start with. But really what the biggest challenge

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right now is still the liquidity and availability in the market.

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LNG has been around for 40 plus years, but actually pricing

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it in a smaller package is still pretty hard

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to actually get that costing. I think most people can

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now estimate a rough in tank price on the

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LNG, but still it's still variable.

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Are you coming up prompt? Are you coming up long

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term contract? So the pricing, how to price the

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commodity is still up in the air. I think the other aspect is

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really assuming you have a commodity and then you're also having

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to sell it onto a bunker contract. And that bunker contract

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is very different to historical LNG contracts. We're done on

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like long term deal, 20 years, nothing on a spot

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basis. And now we're going into pretty much one of the hardest industries

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to actually contract in, the fact that you've got these long term charters but

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only a short term offtaker. So how do you manage that

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balance between the two? And I think that is quite hard to manage.

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The other aspect is the challenge which I think we'll see in

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LNG. Well, we've overcome a lot of the challenges in LNG, but

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the other alternative fuels, the other challenges I see is

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the commodity is not really there yet, it's not liquid.

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So how are people going to be trading this more on a spot basis

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that isn't just long term offtake contracts? So it kind of

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seems to me like LNG is another

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level of complexity beyond where the other alternative fuels are. Does

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that kind of speak to its commercial viability? Correct. I think it's also

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due to the sheer quantity it's been around for 40 years,

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that helps. Exactly. And on top of

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that we're seeing new pricing mechanisms being evolved in the

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market. Over the last ten years we've had the emergence of JKM, which is a

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Japan Korea spot marker that's only really in the

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last five years started to become more tradable. And there's also the futures

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on that as well. So I think overall we've taken this long to

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get to even just spot prices of LNG. So I think

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we're still not there yet, even on smaller packages. So how are we going to

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replicate that with the alternative fuels will happen.

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We are optimistic, but there is a ways to go. So, on that

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note, what are some of the barriers that you see for

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some of the up and coming alternative fuels? I hate

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saying the chicken and the egg because you go to

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any interview and they'll say the same. So I'll try to not lean on that

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too much. I would lean on what is actually the difficulties of getting

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there. Methanol is not going to be good unless it's green and same with

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ammonia. Otherwise it's just worthless, as I think. You just don't

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like the color blue is what I'm hearing. Not my color.

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And so when you're making it, let's say you're making it from electricity,

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green renewables, you have like, let's say a PPA

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contract, a power offtake agreement. These are

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huge contracts that are very difficult to sign

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long term. They're just very difficult contracts. And then

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you're having to merge that with some kind of like bunker offtake contract. If

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you have a container vessel that's willing to do, let's say

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a long term ten year, 15 year horizon, that's fine.

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But many ship owners aren't going to sign up for a ten to 15 year

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offtake agreement. It's going to be hard for people

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to produce alternative fuels just for the marine

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sector. If they're not going to sign long. Term

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contracts, that makes a lot of sense.

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So as far as long term contracts go, that's kind of within the realm

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of container liners. So can you tell me a bit more about that?

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Absolutely. I think, you know, you have to look at the viable

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shipping sectors that would suit Prabs probably more

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the long term things, and that is containers and crews, and that's because they're going

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there regular. But I think we saw before that

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CMA and these other shipping liners, they were willing to sign

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up longer term contracts and this was pre COVID,

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so LNG prices were pretty low. They were, I think,

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you know, the long term it looked pretty actually, you

Speaker: 00:07:56

know, since COVID since the natural gas prices, the war

Speaker: 00:07:59

in Ukraine, the volatility in price FIS too much. So

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we saw a lot actually go back to other conventional

Speaker: 00:08:07

fuels because the price was so high. So I would say whilst

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containers are suited for the long term, they're being,

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I would say, a bit more conservative now of signing up those volumes. When you

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buy a dual fuel vessel, you want to have that optionality between the

Speaker: 00:08:21

fuels, you want to pick the cheapest fuels. So what we actually

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saw, which was a big thing in the market, was actually CMA apparently,

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is going to convert their new building orders from some of their methanol

Speaker: 00:08:33

to LNG. And the one thing to note about that is

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to the LNG vessels or the LNG dual fuel,

Speaker: 00:08:40

they do cost more than a methanol dual fuel vessel. But if they're

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willing to make that investment correct. And I don't believe it's.

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Just from the green side of things, I think it's very much just shows

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that I would say the medium term, most people see that

Speaker: 00:08:55

LNG will be a very competitive fuel in the market.

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There is a slight green side to this as well, but I also think willing

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to pay the added capex shows the market that

Speaker: 00:09:06

this is probably the most reliable green fuel for the medium

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term at present.

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Fantastic. Well, I mean, it sounds like it's pretty great

Speaker: 00:09:17

to be you right now. Well, this volatility

Speaker: 00:09:21

is actually helping traders. We're not going to lie, which is good for us. I

Speaker: 00:09:25

mean, we want to get into this space. We have the expertise and

Speaker: 00:09:28

historically everything was done long term, direct, and I think people

Speaker: 00:09:32

now are seeing the role of the trader, particularly in the bunker fuel side for

Speaker: 00:09:36

RLNG. So, yeah, it's good for us. I mean, TTF and

Speaker: 00:09:39

all these gas prices, they're changing on a daily basis and

Speaker: 00:09:43

they're changing massively as well. So going back to

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the subject of new builds as we cast our eye

Speaker: 00:09:51

to the future, what do you see the future of new

Speaker: 00:09:55

builds looking like for the next five or ten years? I think

Speaker: 00:09:58

it's one of the hardest ones actually, for ship owners to go out there. You're

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asking a ship owner to go out and spend huge

Speaker: 00:10:06

amounts of capex on a 20 year asset and

Speaker: 00:10:09

it's probably backed by a very short term charter. So how do you manage that

Speaker: 00:10:13

risk? Again, I am bullish more

Speaker: 00:10:17

on the gas side of things just because I see that we

Speaker: 00:10:20

have the fuel today. And there is also a way that you can

Speaker: 00:10:24

actually manage that over the next 20 years. You can start

Speaker: 00:10:28

with LNG, then go to bioLNG, slowly input

Speaker: 00:10:32

bio LNG and then you could end up, I don't know, methanatin, hydrogen

Speaker: 00:10:35

or something like that. So there FIS a pathway to those vessels. When

Speaker: 00:10:39

it comes to methanol, if you're a tanker, if you're a bulker, you're

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reliant on other industries supporting that production

Speaker: 00:10:47

because you will not be supporting the producer on that.

Speaker: 00:10:51

Your volumes just aren't big enough or the offtake isn't as

Speaker: 00:10:54

reliable. So I would definitely know. Probably

Speaker: 00:10:58

the methanol is likely the way that people will go because it's

Speaker: 00:11:01

a lower capex. But the actual thought of actually green methanol going

Speaker: 00:11:05

into those tanks, I don't actually think they'll be seeing green methanol for a long

Speaker: 00:11:08

time. You heard it here first, folks. Jonathan's

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Hot, take one last

Speaker: 00:11:16

question. It's a bit of a saucy one. Okay, nice. As far

Speaker: 00:11:19

as traders are concerned, what do you foresee their role

Speaker: 00:11:23

looking like in terms of alternative fuels for,

Speaker: 00:11:27

I don't know, the next decade? It's something that

Speaker: 00:11:31

we think internally all the time. The role of the trader

Speaker: 00:11:34

is changing, that's a fact. Bunker fuels will never

Speaker: 00:11:38

be just basis price anymore. There's going to be other

Speaker: 00:11:42

factors. There's the environmental factor, there's going to be the

Speaker: 00:11:45

EU ETS, there's going to be the fuel EU. If people start putting a charge

Speaker: 00:11:49

on CII, there's going to be all of these different

Speaker: 00:11:54

elements that will play a role in selecting your fuel. And the other

Speaker: 00:11:58

aspect is as well, you still have the role of biofuels. Let's say you have

Speaker: 00:12:01

a dual fuel vessel for LNG. You still have LNG bio,

Speaker: 00:12:05

LNG biofuels, conventional fuels, scrubbers. There's

Speaker: 00:12:09

all these decisions to make and you have to make the right one. I think

Speaker: 00:12:12

the trader has to be kerry aware of the pricing

Speaker: 00:12:16

in the different regions, which is going to be very hard considering

Speaker: 00:12:20

these prices aren't transparent. I very much see that the role of

Speaker: 00:12:24

traders should actually become more important to the

Speaker: 00:12:27

client because they'll be able to cover a lot more.

Speaker: 00:12:31

For those of us who are interested in

Speaker: 00:12:34

watching the LNG space, and maybe

Speaker: 00:12:38

we don't really have a means to do that or the channels,

Speaker: 00:12:42

what would your suggested course of action be there? I

Speaker: 00:12:46

would just very much keep an eye out on how this winter is going to

Speaker: 00:12:49

be. I think it's going to be a huge show to the market

Speaker: 00:12:52

of where LNG prices are heading. We're

Speaker: 00:12:56

just one winter away from the Ukraine war with

Speaker: 00:13:00

the supply issues and the highs last year, and we're

Speaker: 00:13:04

already going into this winter where we have enough supply in Europe. The

Speaker: 00:13:07

prices are coming down, we're bunkering already LNG in

Speaker: 00:13:11

Europe. So with 70% new capacity over the next few

Speaker: 00:13:15

years, if we come out of this year where we believe that there is

Speaker: 00:13:18

sufficient supply, I'm quite bullish that the prices are

Speaker: 00:13:22

going to show people that LNG will probably be the fuel up until,

Speaker: 00:13:25

let's say, 2030 or something. Well, there you have it,

Speaker: 00:13:29

folks. Jonathan is bullish on LNGs,

Speaker: 00:13:33

and you probably should be too.

Speaker: 00:13:38

Let's talk about the EUETS with Hugh Taylor and Luke

Speaker: 00:13:42

Hanley. So I'm Hugh Taylor. And I'm

Speaker: 00:13:45

Luke Hanley and we manage. A consultancy at FIS which

Speaker: 00:13:49

helps our shipping clients prepare for the EU ETS

Speaker: 00:13:54

phenomenal. The EU ETS not the most

Speaker: 00:13:57

straightforward of things. What are you guys doing to help? So

Speaker: 00:14:01

that's the EU emissions trading system, which from January

Speaker: 00:14:05

next year will include shipping clients.

Speaker: 00:14:08

We at FIS have a lot of long standing

Speaker: 00:14:11

relationships with many shipping clients. So we've done a lot of thinking

Speaker: 00:14:15

about how best to simplify this complex situation

Speaker: 00:14:19

for our clients today. We thought we would talk about

Speaker: 00:14:22

three practical issues our clients are facing

Speaker: 00:14:26

and then we'll offer some insight and solutions around these.

Speaker: 00:14:30

I'm assuming because you've dedicated an entire roadshow

Speaker: 00:14:34

to this. In fact, you just got back from Dubai, I believe, and Luke's

Speaker: 00:14:37

crawled out of whatever conference he's been at recently.

Speaker: 00:14:41

I'm assuming we're not going to be able to capture everything on today's

Speaker: 00:14:45

episode. Correct. So I think we better skip over the basics

Speaker: 00:14:49

for anyone listening would like to know a little bit of background on how the

Speaker: 00:14:52

EU ETS works, the EUA market and price

Speaker: 00:14:55

drivers, emissions, price, risk management and trading

Speaker: 00:14:58

strategy. Check out the analysis section at the bottom of our Green

Speaker: 00:15:02

Transition webpage, which is at

Speaker: 00:15:08

Green transition. So I've written some expansive

Speaker: 00:15:12

articles on those topics. Fantastic.

Speaker: 00:15:15

And because we're so technically advanced here at FIS,

Speaker: 00:15:19

we've actually hyperlinked that on our website. So can

Speaker: 00:15:22

you give us an overview of what we're going to be covering today? Yeah,

Speaker: 00:15:26

sure. So the three issues that we're going to talk about today are who

Speaker: 00:15:30

pays, the challenges of opening a trading or registry

Speaker: 00:15:34

account and how to get around them, and how best to trade EU

Speaker: 00:15:37

allowances. EUAs. So the first one is

Speaker: 00:15:41

probably John's favorite question, which you both have been

Speaker: 00:15:45

graced with very frequently around the halls of

Speaker: 00:15:48

FIS, and that is who's responsible for paying for

Speaker: 00:15:52

this? So that's right. It's a bit of a thorny question among clients. The question

Speaker: 00:15:56

is who bears a responsibility for surrounding EUAs on September 30,

Speaker: 00:16:00

especially when a ship owner delegates the Ism code compliance to a

Speaker: 00:16:04

manager. And in short, the answer really is it depends. In a September

Speaker: 00:16:07

draft text, the Commission defines the responsible entity as the shipping

Speaker: 00:16:11

company. So this definition includes owners, managers, bareboat,

Speaker: 00:16:15

charter, or indeed any entity that assumes the responsibility for operation

Speaker: 00:16:18

owner. So while the draft does stipulate, the ship owner has

Speaker: 00:16:22

principal responsibility for ETS obligations. A manager, if

Speaker: 00:16:26

delegated responsibilities through a management agreement, is obligated to

Speaker: 00:16:30

submit allowances. So therefore the parties can effectively choose who has

Speaker: 00:16:33

responsibility. If the manager is chosen, he must present to the relevant

Speaker: 00:16:37

administrating authority a documented mandate from the ship owner,

Speaker: 00:16:40

including contact details. If he doesn't, well, the ship owner will

Speaker: 00:16:44

be deemed responsible. The Commission aims to finalize regulations

Speaker: 00:16:48

in Q four of this year before the EU ETS for shipping commences on

Speaker: 00:16:52

January 1 of next year. We expect them to provide more

Speaker: 00:16:55

clarity on this situation. Keep your eyes peeled. Or keep your ears

Speaker: 00:16:59

peeled. So how does this actually play

Speaker: 00:17:02

out in practice is my question here. How we perceive it at the

Speaker: 00:17:06

consultancy here is that two scenarios are likely. Option one, the

Speaker: 00:17:10

ship owner and the manager will decide responsibilities in their bilateral

Speaker: 00:17:13

management contract. And then option two is that the manager remains

Speaker: 00:17:17

responsible for EU surrender. If the ship owner delegates, then the Ism

Speaker: 00:17:21

co compliance. So this is a process that has been in place for the past

Speaker: 00:17:24

two decades, although recent indications suggest the EU is probably

Speaker: 00:17:28

going to shift its thinking towards option one. Meanwhile,

Speaker: 00:17:31

simultaneously, member states must ensure that if another entity assumes

Speaker: 00:17:35

ultimate responsibility for fuel purchase or ship operation, for example,

Speaker: 00:17:39

the shipping company, via contractual agreement, is entitled to

Speaker: 00:17:43

reimbursement for surrendering costs. So I guess

Speaker: 00:17:46

my big question is if Luke and I have a contract,

Speaker: 00:17:50

and in that contract luke is responsible for surrendering

Speaker: 00:17:54

these. You know, luke I don't

Speaker: 00:17:58

know. Disappears? Who's

Speaker: 00:18:01

responsible for these EUAs. Is there a penalty? Do I get the penalty? Does

Speaker: 00:18:05

Luke get the penalty? What happens? That's freight. So there is a penalty to

Speaker: 00:18:09

disincentivise this behavior. So if the ship owner fails to transfer

Speaker: 00:18:12

allowances to the manager or becomes insolvent, then the manager is left

Speaker: 00:18:16

empty handed while still accountable for these obligations. So,

Speaker: 00:18:20

depending on a ship's trade and emissions, noncompliance costs can average

Speaker: 00:18:24

€500,000 per year or even more. Coming back to this example

Speaker: 00:18:28

that Fern used, basically, Luke will get off scoff free while Fern is left

Speaker: 00:18:31

holding the bag. Well, Luke would never do that to me, first

Speaker: 00:18:35

of all. But second of all, what solutions are available

Speaker: 00:18:39

for those like Fernanda

Speaker: 00:18:43

that are unsure about what their surrender requirements are?

Speaker: 00:18:47

Yeah, so there definitely are a few solutions out there. And one in particular that

Speaker: 00:18:50

comes to mind right now is for those uncertain about future obligations. Creating an

Speaker: 00:18:54

EUA buffer is definitely a popular strategy amongst clients. You can do this

Speaker: 00:18:58

via trading account futures or something we call warehousing, which we will get back

Speaker: 00:19:02

to in a minute. For legal disputes or questions between charterers and ship

Speaker: 00:19:05

owners, contact us and we can introduce you to our preferred legal

Speaker: 00:19:08

specialist who is very experienced in these negotiations.

Speaker: 00:19:13

So I'm assuming we have something. And by we, I

Speaker: 00:19:17

mean the European Commission has something a bit more concrete for

Speaker: 00:19:21

how to open a registry account. Well, actually, as it

Speaker: 00:19:25

stands, this is equally confused

Speaker: 00:19:28

and it has been a messy scramble for shipping

Speaker: 00:19:31

clients, to be honest. Shipping clients aren't currently

Speaker: 00:19:35

able to open a Maritime Operator holding account

Speaker: 00:19:39

or a Mohaw, which is the account from which they will

Speaker: 00:19:43

eventually surrender their EUAs on 30 September

Speaker: 00:19:46

2025. So they're not able to open to this account until

Speaker: 00:19:50

February 2024. So that's when the commission releases a

Speaker: 00:19:53

list that assigns shipping companies to a country,

Speaker: 00:19:57

to a national administrator within a country. Now, while

Speaker: 00:20:01

it's widely stated that you are currently

Speaker: 00:20:05

already able to open a trading account on the EU

Speaker: 00:20:08

registry, in reality, this is also not the case. One of

Speaker: 00:20:12

the central stipulations most national administrators of the

Speaker: 00:20:16

EU registry seem to have put in place is a

Speaker: 00:20:19

requirement to be VAT registered locally.

Speaker: 00:20:23

Now, given many shipping companies are incorporated in non EU,

Speaker: 00:20:27

often exotic jurisdictions, we have a problem.

Speaker: 00:20:31

But equally, I've spoken with English clients facing the same issue. So

Speaker: 00:20:34

theoretically, what would my options be if I didn't have a VAT

Speaker: 00:20:38

registration in an EU country? One country that decided

Speaker: 00:20:42

to not make such a stipulation was Malta, which instead

Speaker: 00:20:46

requested you just have an EU bank account. But they were so

Speaker: 00:20:49

flooded with applications, basically they closed to further

Speaker: 00:20:53

applications, and with a backlog of some 300

Speaker: 00:20:56

among just a handful of staff, there were other exceptions.

Speaker: 00:21:00

So Netherlands don't require EU VAT

Speaker: 00:21:04

registration, just an EEA bank account, but

Speaker: 00:21:08

they do do a risk analysis on the country of origin, which means

Speaker: 00:21:11

some of those exotic locations might present an issue. And they also

Speaker: 00:21:15

request that you register with the Chamber of Commerce, which essentially

Speaker: 00:21:18

means setting up a local entity and paying corporation tax

Speaker: 00:21:22

on local business, which is not ideal.

Speaker: 00:21:26

Meanwhile, Spain and Sweden don't require local VAT registration, but

Speaker: 00:21:29

do ask that one of your two minimum account representatives have permanent

Speaker: 00:21:33

residence in the country. And finally, Cyprus

Speaker: 00:21:37

requires VAT registration in an EU

Speaker: 00:21:40

country, although I have been told competing versions of

Speaker: 00:21:44

this by different contacts within the registry and their situation

Speaker: 00:21:48

seems likely to change. So in short, if you don't have

Speaker: 00:21:52

and EU VAT number, the situation is pretty

Speaker: 00:21:55

difficult right now. The EU will have to change things

Speaker: 00:21:59

in Q Four, we believe, to provide a clear path forward

Speaker: 00:22:03

and clear up this mess for the many medium and small sized

Speaker: 00:22:06

shipping clients that are unable to get started. Just to

Speaker: 00:22:10

clarify something here, they can't actually buy

Speaker: 00:22:13

EUAs, then there are actually. Other

Speaker: 00:22:17

routes, there are other ways they can do it. Firstly, for example,

Speaker: 00:22:21

you can buy futures even without a trading account

Speaker: 00:22:24

through some clearing members, as long as you promise to trade out of the

Speaker: 00:22:28

futures before expiry. And if you don't have a clearing account,

Speaker: 00:22:32

there is one other option that luke's alluded to

Speaker: 00:22:36

warehousing. Warehousing, that's correct. But before we get on to

Speaker: 00:22:39

that, we should probably first go over our final topic, which will give an

Speaker: 00:22:43

introduction into how to trade EUAs. All right, fine. Then tell

Speaker: 00:22:46

me what is the best way to trade EUAs?

Speaker: 00:22:50

Okay, so you can buy EUAs in the primary market,

Speaker: 00:22:54

which is via the auctions hosted by EEX,

Speaker: 00:22:57

or on the secondary market, which is via banks,

Speaker: 00:23:01

brokers or traders. They come in the form of futures

Speaker: 00:23:04

or physical EUAs. These are just the contracts that go into

Speaker: 00:23:08

your registry account and that you will eventually surrender. While of some

Speaker: 00:23:12

of the bigger, more established traders are keen to hedge

Speaker: 00:23:16

the futures, perhaps in line with their strategies

Speaker: 00:23:19

on bunkers or forward freight agreements,

Speaker: 00:23:22

FFAs many and particularly the mid and

Speaker: 00:23:26

smaller size shipping clients are seeing value in buying physical

Speaker: 00:23:29

EUAs on the OTC market. Why is that? The

Speaker: 00:23:33

advantages of this are many and they can probably be split

Speaker: 00:23:37

nicely into two groups, basically cheaper and easier. So

Speaker: 00:23:41

cheaper? Well, firstly, maintaining an auction account on

Speaker: 00:23:45

EEX can be expensive and it's typically populated by big

Speaker: 00:23:48

industry. The physical EUA is seemingly cheaper up

Speaker: 00:23:52

front. So over the past three years, the benchmark deck

Speaker: 00:23:55

23 future, which is the main future that's traded, has been on

Speaker: 00:23:59

average some three to 6% more expensive than the spot price.

Speaker: 00:24:03

Finally, big banks build in credit risk and large

Speaker: 00:24:06

margins, thus adding to the price now easier. So

Speaker: 00:24:10

to trade physical, clients don't need margins or clearing

Speaker: 00:24:13

accounts. OTC physical can be obtained in custom,

Speaker: 00:24:17

more convenient lot sizes of whatever size you like. So

Speaker: 00:24:21

the smallest size in futures is one lot, which is a thousand EUAs.

Speaker: 00:24:25

But the smallest size in OTC theoretically could just be one

Speaker: 00:24:28

EUA, although it wouldn't be much worth it from a cost perspective of the

Speaker: 00:24:32

provider. And many people often prefer physical products

Speaker: 00:24:36

to futures because you can hedge as you go and spread the risk. And

Speaker: 00:24:40

finally, the liquidity is very good on the physical. So basically,

Speaker: 00:24:43

you would come to a broker like us, give us your size, we field

Speaker: 00:24:47

it to the market. Now, we work with all the top eway traders, many of

Speaker: 00:24:51

whom have got their own large inventories, and we would then show you

Speaker: 00:24:54

the best price, which is quite a big advantage over going to

Speaker: 00:24:58

just one trade house. So, long story short, cheaper, easier and

Speaker: 00:25:02

cleaner. So now, is one of you going to tell us about

Speaker: 00:25:05

warehousing? So I'll do the honors on that one. Yeah, it's one idea

Speaker: 00:25:09

gaining traction is that of warehousing EUAs on behalf of clients. Some

Speaker: 00:25:13

of our preferred partners that we work with offer this facility, whereby the client

Speaker: 00:25:16

agrees for the EUAs to be held for them and delivered to an account of

Speaker: 00:25:19

their choice at some point in the future, given ten days notice. So

Speaker: 00:25:23

these partners even offer a warehousing yield to hold your EUAs, which at the

Speaker: 00:25:27

last time of checking was in the region of 2% per annum. I'll

Speaker: 00:25:31

list a few advantages of this option. So, number one, you avoid the

Speaker: 00:25:34

admin involved in trying to open a trading account with overburdened national

Speaker: 00:25:38

administrators. Number two, being able to buy now, so getting ahead of

Speaker: 00:25:42

the game. Number three, many don't even know yet whether the onus will fall on

Speaker: 00:25:46

them to actually buy the EUAs. And finally, and most

Speaker: 00:25:49

importantly, in our opinion, the idea of going long on EUAs is

Speaker: 00:25:53

something attractive, given that stringent climate policy and their

Speaker: 00:25:56

subsequent tendency to increasingly limit supply.

Speaker: 00:26:00

And crucially so, the idea of going long

Speaker: 00:26:04

EUAs is quite attractive to our clients at the moment,

Speaker: 00:26:07

given the EU's stringent climate change policy and the

Speaker: 00:26:11

subsequent tendency to increasingly limit supply. Based on

Speaker: 00:26:15

current forecasts, many leading at EUA analysts expect the

Speaker: 00:26:18

EUA price to rise significantly to 2030, well beyond the

Speaker: 00:26:22

100 euro mark. For example, analysts at London Stock Exchange

Speaker: 00:26:26

Group two weeks ago projected the price to rise above

Speaker: 00:26:30

€400 by 2040. Well, we've covered a lot of

Speaker: 00:26:33

information in a very short amount of

Speaker: 00:26:37

time, but I feel better informed. I think the freight up

Speaker: 00:26:40

community feels better informed. So thank you so much for coming

Speaker: 00:26:44

on. Yeah, thank you for having us, Fern. And just like to say, yeah,

Speaker: 00:26:47

get in touch. We offer weekly intel reports to our clients

Speaker: 00:26:51

and we do special reports on things such as main

Speaker: 00:26:55

price drivers in the market, short and medium term price projections,

Speaker: 00:26:59

et cetera. And we can answer any of your questions. So, yeah, get in

Speaker: 00:27:02

touch and we should help you along. Yeah. Normally when people say,

Speaker: 00:27:06

and I just like to add, they follow it up with, I'm a huge fan

Speaker: 00:27:09

of the show, so I'm just going to pretend that's what you

Speaker: 00:27:13

said. Oh, and I'd just like to add I'm a real huge fan of the

Speaker: 00:27:16

show. I think you're such a natural. Oh, God bless you. Thank you

Speaker: 00:27:20

so much. All Freight, let's join the people's broker to

Speaker: 00:27:24

discuss the oil market. Archie, I know that

Speaker: 00:27:28

you are literally one of two people on the desk right now, so we

Speaker: 00:27:31

appreciate you joining us. Ricky's back. So that's why I've come. Ricky got back

Speaker: 00:27:35

from lunch? Yeah. Oh, what did he have for lunch? I think he's got Pally

Speaker: 00:27:38

kitchen. Don't know what exactly he went for. But I'm going to go

Speaker: 00:27:42

for the Falafel Bowl after this, but enjoy it before then.

Speaker: 00:27:46

What is going on in the oil market? It's been pretty choppy.

Speaker: 00:27:50

Lots of ups and downs over the last week, to be completely honest.

Speaker: 00:27:53

It's definitely all eyes on the OPEC meeting, which

Speaker: 00:27:57

kind of leads into why it's been choppy,

Speaker: 00:28:01

because the OPEC meeting was initially supposed to happen on Sunday, just

Speaker: 00:28:04

gone. Yes, but last week that got

Speaker: 00:28:08

pushed back. And when that got pushed back,

Speaker: 00:28:12

crude just dumped. Yeah, it came off really

Speaker: 00:28:15

aggressively as soon as that news came out. Like someone rescheduling a

Speaker: 00:28:19

tinder date, you just don't know if you're going to come back from that. It

Speaker: 00:28:22

creates uncertainty. Like the tinder date, you don't know what the outcome is going to

Speaker: 00:28:25

be. I think general consensus leading up to that meeting before it got pushed

Speaker: 00:28:29

back was the decision was going to be for the oil production

Speaker: 00:28:33

cuts to be extended further into 2024. So with that

Speaker: 00:28:37

being pushed back, everyone was like, oh, has there been disagreements?

Speaker: 00:28:41

Speculation starts happening. It snowballs crew really came

Speaker: 00:28:44

off because obviously that level of support that would have been added by production

Speaker: 00:28:48

cuts being extended was almost it's not been taken away by any means,

Speaker: 00:28:52

but like I said, it adds that kind of level of

Speaker: 00:28:55

mystery. So it got pushed back to this Thursday, as in tomorrow.

Speaker: 00:28:59

Another thing when the crude really did come off, it was a week ago today,

Speaker: 00:29:03

actually. It was last Wednesday that it happened. It crashed well over a

Speaker: 00:29:06

dollar, like sub 80 levels down to well, the low was actually

Speaker: 00:29:10

78 48 at the time, having traded around like 81

Speaker: 00:29:14

50 most of the day. But then in the afternoon, it pinged back up

Speaker: 00:29:17

pretty much instantly recovered or regained all the losses to

Speaker: 00:29:21

settle, I think, slightly higher on the day. There was a lot of volatility

Speaker: 00:29:24

in the market there. The downward pressures did linger for the rest of the week

Speaker: 00:29:28

and then into the beginning of this week, particularly from, well,

Speaker: 00:29:32

obviously off the back of that announcement. But then, yeah, there was lingering pressures from

Speaker: 00:29:36

EIA data, which showed. A massive US crude

Speaker: 00:29:39

stockpile build of like 8.7 million barrels, which is substantial

Speaker: 00:29:43

solid. Yeah, that was obviously pushing

Speaker: 00:29:46

prices down a little bit. There was a small gasoline stockpile build as

Speaker: 00:29:50

well in the US. Which is often quite a good indicator of

Speaker: 00:29:54

low consumer demand. So then kind of demand worries

Speaker: 00:29:58

sneaking back in as well, applying downward pushes on the price.

Speaker: 00:30:02

Most times that we've dipped below the $80 per barrel mark

Speaker: 00:30:05

recently, there has been support included.

Speaker: 00:30:09

Yesterday there was another announcement regarding the OPEC meeting saying

Speaker: 00:30:13

that it possibly could be pushed back further. Basically what we're hearing is

Speaker: 00:30:17

there's quite a lot of disagreement within the OPEC members

Speaker: 00:30:20

regarding this policy on the oil production cuts.

Speaker: 00:30:25

As far as the market is aware, the meeting

Speaker: 00:30:28

is happening tomorrow. But like I said, this news came out

Speaker: 00:30:32

yesterday, just that it could be pushed back further. So we

Speaker: 00:30:36

saw a similar thing happen than we did last Wednesday. Not

Speaker: 00:30:40

quite as drastic, but it was a sharp decrease, down about a dollar,

Speaker: 00:30:43

again, sub 80 levels. But then we did find support in the afternoon. It kind

Speaker: 00:30:47

of traded back up to higher levels, but that was from quite a

Speaker: 00:30:50

sharp fall in the US dollar. And there's normally kind of an inverse

Speaker: 00:30:54

correlation there. When US dollar gets less valuable, crude

Speaker: 00:30:58

goes up because holders of foreign currencies are buying more oil because they've

Speaker: 00:31:02

got greater buying power when the US dollar is weaker. So

Speaker: 00:31:05

that offered support there. And then again, we kind of spiked into the afternoon.

Speaker: 00:31:09

We spiked to above 82 a barrel coming from sub 80 levels.

Speaker: 00:31:13

So it's been pretty drastic.

Speaker: 00:31:17

So this morning, crude services trading higher.

Speaker: 00:31:21

It's just looking ahead to this meeting, which hopefully happens

Speaker: 00:31:25

tomorrow. I think the market is kind of banking on

Speaker: 00:31:29

it happening tomorrow. Unless anything drastic changes, it would

Speaker: 00:31:32

appear that the expectation is back that production cuts will be

Speaker: 00:31:36

extended into 2024. And I think that's what's offering support to the market

Speaker: 00:31:40

this morning. Although any kind of major upside

Speaker: 00:31:44

gains are definitely being capped by some weak

Speaker: 00:31:47

data coming out of China. Still softer than expected industrial

Speaker: 00:31:51

profits, which kind of points to demand struggling in that

Speaker: 00:31:55

region, which has been a kind of ongoing factor, well,

Speaker: 00:31:58

since post Pandemic really. It's always kind of lingering there when it comes

Speaker: 00:32:02

to demand worries, applying that downward pressure on oil prices.

Speaker: 00:32:06

So let's see what happens tomorrow. Let's see if tomorrow happens.

Speaker: 00:32:09

If tomorrow happens. Yeah. In the fuel market, I think that the main

Speaker: 00:32:13

kind of focus of what I'm going to talk about is the front months in

Speaker: 00:32:16

the very low sulfur Singh

Speaker: 00:32:20

complex. And they've really, really been

Speaker: 00:32:23

crashing over the week. Oh, wow. What's been happening there?

Speaker: 00:32:27

We're coming off of highs from the

Speaker: 00:32:31

beginning of last week. So looking at the crack, the Sing .5 crack

Speaker: 00:32:34

that was trading for the December, which is the front month, that was

Speaker: 00:32:38

trading almost $18 per barrel monday

Speaker: 00:32:41

last week. So right at the beginning of last week, and we're now

Speaker: 00:32:45

kind of around, we're sub twelve levels now, so

Speaker: 00:32:49

it's off. A good six or $7 has been lower

Speaker: 00:32:53

Monday of this week. We saw some super volatile trading in that crack

Speaker: 00:32:57

contract, which makes the flat price for the marine fuel just fly

Speaker: 00:33:00

around. I think a lot of it is coming off of Azure Refinery news.

Speaker: 00:33:04

I think Q Eight is one of the biggest refineries, if not their biggest. And

Speaker: 00:33:08

the Azure refinery is a massive producer of

Speaker: 00:33:11

this very low sulfur marine fuel oil. It's been down for

Speaker: 00:33:15

maintenance and repairs, hence why the crack did get so high in the first

Speaker: 00:33:19

place. And the front spreads as well because there was

Speaker: 00:33:22

no marine fuel coming out of that refinery. And being such a big

Speaker: 00:33:26

supplier, that really kind of affected the market. When the Azore

Speaker: 00:33:29

refinery is fully operational, it produces

Speaker: 00:33:33

about 200,000 barrels per day of very low self fuel or which equates

Speaker: 00:33:37

to about 12 million tons a year. Anyway, with that being down,

Speaker: 00:33:40

crack got really high. And then there's been news kind of coming through in

Speaker: 00:33:44

drips and drabs over the last week, ten days saying, oh, it's going to be

Speaker: 00:33:48

fully operational back fully operational in the next couple of weeks. And

Speaker: 00:33:51

that's kind of softened that front crack a bit. I don't think

Speaker: 00:33:55

that refinery news alone is the cause of all this. I don't think it's

Speaker: 00:33:59

robust enough, I don't think it's enough production to affect the market in such a

Speaker: 00:34:02

drastic way. But it's definitely seemed to be the kind of

Speaker: 00:34:06

catalyst, if you will. And then Monday when we saw the super

Speaker: 00:34:10

volatility in the 0.5 crack, I think a lot of that was it was coming

Speaker: 00:34:13

off quite drastically in the front. It definitely hit some stop losses, some major stop

Speaker: 00:34:17

losses on the way down because it was gapping like $0.50, which is

Speaker: 00:34:21

aggressive. I mean, normally this crack, if it moves, it's in kind

Speaker: 00:34:25

of five to ten cent increments. So if it's gapping fifty cents

Speaker: 00:34:28

at a time, noteworthy. Yeah, it's

Speaker: 00:34:32

seriously dramatic. And like I said, I think there was obviously some

Speaker: 00:34:36

stop losses lower down as we were coming off anyway, in more of a natural

Speaker: 00:34:39

way. Those stop losses got hit, sold out a load of positions, and it just

Speaker: 00:34:43

snowballed the downward spiral. So, I mean, the deck traded as low as $10 a

Speaker: 00:34:46

barrel. It was literally, it was like 1110 50 and then

Speaker: 00:34:50

ten in like 5 seconds. Everyone was like, everyone was like, what's going

Speaker: 00:34:54

on? I mean, great time if you're a buyer, right? But

Speaker: 00:34:58

with the volatility we've seen, it just kind of bounced straight back up. I mean,

Speaker: 00:35:01

in that morning session, it dropped $2.70, that contract in a

Speaker: 00:35:05

single session. But then it kind of recovered almost like $2

Speaker: 00:35:09

of that loss within the next few hours. So we've seen some real volatility in

Speaker: 00:35:12

the front, although it's down to more kind of stable levels than what

Speaker: 00:35:16

we were seeing when it was like $17 per barrel. $18 per barrel.

Speaker: 00:35:21

And same for the front spread on the sing .5. So the deck versus

Speaker: 00:35:24

jan, that's off like $20 since

Speaker: 00:35:28

two weeks ago. To yeah, it's the same story. Basically. It's the same

Speaker: 00:35:32

narrative with Azor being down. That near term supply is

Speaker: 00:35:35

tight. So that's why the deck was trading at such a premium to the jan,

Speaker: 00:35:39

which is it was good for those who need to roll

Speaker: 00:35:42

positions from deck to jan. They're getting quite a hefty

Speaker: 00:35:46

premium on that. But again, that's now trading around $10 per metric

Speaker: 00:35:50

ton from like over 30. So, yeah, some real kind of drastic changes in

Speaker: 00:35:53

the fuel market. It seems to have kind of settled a little bit today and

Speaker: 00:35:57

yesterday almost maybe priced in. But yeah, it'll

Speaker: 00:36:01

be interesting to see kind of how that unfolds when Azura is fully back

Speaker: 00:36:04

operational. China have issued an

Speaker: 00:36:08

additional 3 million tons of fuel oil imports

Speaker: 00:36:12

on non state firms. I mean, when that news came out, there was

Speaker: 00:36:15

no real major shift on the market initially. It'll

Speaker: 00:36:19

be interesting to see kind of if that does affect the paper market at all,

Speaker: 00:36:22

if that does affect the tourism market and how people interpret that. I

Speaker: 00:36:26

thought if anything, it would have been slightly bullish, but like I said, markets been

Speaker: 00:36:29

coming off. And then in today's trading, nothing

Speaker: 00:36:33

too crazy to report, high sulfur fuel has been

Speaker: 00:36:37

out of the window for a little bit because obviously all this focus hao been

Speaker: 00:36:40

on low sulfur. But those spreads are pushing this morning

Speaker: 00:36:44

and yesterday actually up about a dollar yesterday and up about a dollar this morning.

Speaker: 00:36:48

Amazing. Well, Archie, the podcasting

Speaker: 00:36:51

booth is now sufficiently scented of

Speaker: 00:36:55

is an opportunity for you all the fans of

Speaker: 00:36:59

Smith Seven here. I wanted to get him something nice for

Speaker: 00:37:03

Christmas. So I was thinking a bottle of his favorite

Speaker: 00:37:06

perfume that's too expensive. And so you can help with

Speaker: 00:37:10

this by commenting on

Speaker: 00:37:13

our latest LinkedIn post. Just comment

Speaker: 00:37:17

hashtag the people's broker. And if we get at least ten

Speaker: 00:37:21

comments, I will show up with a bottle of Dior savage. No,

Speaker: 00:37:25

silly, your favorite broker.

Speaker: 00:37:28

Do it, Hewitt. I dare you. This year it's going to be a gift from

Speaker: 00:37:32

the frayed up community. All you have to do is follow us on LinkedIn at

Speaker: 00:37:36

freight up podcast and then comment hashtag the people's broker and

Speaker: 00:37:40

he will magically get dior sauvage. It's going to happen,

Speaker: 00:37:43

Archie. I feel it. It's in the future. Tell your mom to get you something.

Speaker: 00:37:46

Oh, wait, she's listening. Don't get him perfume this year. Get

Speaker: 00:37:50

him something else because I'm going to take care of the perfume. So you guys

Speaker: 00:37:53

have know, scramble to find something else for him. I

Speaker: 00:37:57

hope so. Archie, as always,

Speaker: 00:38:01

you've been incredible. Thank you so much.

Speaker: 00:38:06

Welcome to your Dry Freight weekly report. So the Cape Market witnessed

Speaker: 00:38:10

a week of significant surge in both rate and trading

Speaker: 00:38:14

volumes in the futures market, which came as a surprise to many

Speaker: 00:38:18

market participants. In the underlying iron ore market, spot

Speaker: 00:38:21

prices reached an 18 month high, surpassing the

Speaker: 00:38:24

$135 mark due to supportive policies from the

Speaker: 00:38:28

Chinese government on property and credit, driving up steel demand and

Speaker: 00:38:32

prices. Additionally, coal demand remained robust in

Speaker: 00:38:35

key regions, contributing to higher rates for smaller vessels. Any

Speaker: 00:38:39

previous losses were recouped in the latter part of last week, with strong gains

Speaker: 00:38:43

observed at the start of this week in Cape size news

Speaker: 00:38:47

market sources said that more owners are considering ballasting towards

Speaker: 00:38:50

Brazil for late December lakean in anticipation the vessel

Speaker: 00:38:54

supply outlook in the North Atlantic could become even tighter

Speaker: 00:38:58

in terms of fixtures. The key C Five iron ore route West Australia to

Speaker: 00:39:02

China was fixed from sub $10 for early December Lake Can

Speaker: 00:39:05

to $11.25 for December 8 through

Speaker: 00:39:09

9th by the end of the week, as owners gain an advantage from tighter

Speaker: 00:39:13

supply in the Atlantic. Moving iron ore on the C Three route from Tuber

Speaker: 00:39:17

out of Qingdao was fixed much higher from the last dun level

Speaker: 00:39:20

to $24.50 for 20 December

Speaker: 00:39:24

onwards and then $27 for nine to

Speaker: 00:39:27

14 December. Given significant increase in

Speaker: 00:39:31

activity. Strong iron ore demand from China has certainly kept the

Speaker: 00:39:34

sentiment on the positive side for the start of this week, which was

Speaker: 00:39:38

a change from last Monday, where we opened with little to write home about

Speaker: 00:39:42

as both November and December traded lower from the onset. Post

Speaker: 00:39:46

index saw the prompt months trade in $400 range, with November and

Speaker: 00:39:50

December trading down to 19,750 and

Speaker: 00:39:53

16,400 respectively. Thursday saw

Speaker: 00:39:57

a huge spike in both volumes and rates as December

Speaker: 00:40:00

contracts ended up peaking at

Speaker: 00:40:02

$20,750 in the evening

Speaker: 00:40:06

session, which was up $3,150.

Speaker: 00:40:10

January traded up to a high of 14,500

Speaker: 00:40:13

plus 1800, and Q One saw an increase of

Speaker: 00:40:17

$1,250 with trades at

Speaker: 00:40:20

$11,750, a big finish to a

Speaker: 00:40:24

spectacular week for the James as December rallied One

Speaker: 00:40:26

$800 after a huge index increase of

Speaker: 00:40:30

5855, an increase that the market has

Speaker: 00:40:34

not seen for some time. January traded up to

Speaker: 00:40:37

15,500, and notably, Q One traded

Speaker: 00:40:40

12,500 a few times. December sold from

Speaker: 00:40:44

24,000 down to sub 23,000 before finding a

Speaker: 00:40:47

level for all you Panamax fans out there.

Speaker: 00:40:51

The fundamentals have remained consistently positive, with Panamax

Speaker: 00:40:55

rates continuing to strengthen throughout the past week. Robust mineral

Speaker: 00:40:59

demand provided support for the transatlantic runs from the USCC

Speaker: 00:41:02

and NCSA. In the south. A tight tennant

Speaker: 00:41:06

list combined with the healthy cargo list contributed to the positive market

Speaker: 00:41:10

conditions in the Asian market. There was an emergence of more

Speaker: 00:41:13

Indonesian coal cargoes in the latter part of the week, resulting in

Speaker: 00:41:17

record volumes in the region. Significant fixtures were observed on

Speaker: 00:41:20

the transatlantic route, particularly with mineral cargoes via the

Speaker: 00:41:24

USCC redelivery to the Continent, Japan and India at the

Speaker: 00:41:28

levels of 31,000, 33,030,

Speaker: 00:41:31

6000 respectively. There was early support to start the week last

Speaker: 00:41:35

Monday as December shifted up to a day's high of 13

Speaker: 00:41:38

900, January to 11,300 and Q

Speaker: 00:41:41

One stayed just under 11,000, printing up to

Speaker: 00:41:44

10,950 in size. Fast forward to Friday

Speaker: 00:41:48

and prompts were the focus and saw the most gains as December

Speaker: 00:41:52

chased up to $16,000 and Q Two broke the

Speaker: 00:41:56

$12,000 resistance to print at

Speaker: 00:41:58

12,150, while Cal 24 traded

Speaker: 00:42:02

up to 12,500. The afternoon saw December retrace

Speaker: 00:42:06

to support at 15,150, Q One back

Speaker: 00:42:10

down to 11,900 and Cal 24 at

Speaker: 00:42:13

12,300. This Monday, december traded up

Speaker: 00:42:17

to 15,900 before retracing in the afternoon,

Speaker: 00:42:21

cal 24 traded several times between 12,450

Speaker: 00:42:24

and 12,700 before stalling and losing most of

Speaker: 00:42:28

the day's gains into the close. And last but

Speaker: 00:42:32

certainly not least for all you Supermax fans last

Speaker: 00:42:35

Monday we saw December and January trade in a range of $350

Speaker: 00:42:39

and up to 13,000

Speaker: 00:42:42

411,100,

Speaker: 00:42:45

respectively. Q One traded to

Speaker: 00:42:48

10,600 and Cal 24 up to

Speaker: 00:42:51

11,600. Fast forward to Friday and we

Speaker: 00:42:54

had quite a bullish day as services pushed up throughout the morning

Speaker: 00:42:58

trading session, with December and January trading up to

Speaker: 00:43:01

15,000 and 12,900

Speaker: 00:43:04

respectively, while Q One traded in size at

Speaker: 00:43:08

11,500. While printing up to

Speaker: 00:43:10

11,700, cal 24 traded up to

Speaker: 00:43:14

12,175. This bullish trend didn't

Speaker: 00:43:18

stop there as it continued this Monday with December and January

Speaker: 00:43:21

trading up to 15,000 and

Speaker: 00:43:24

13,200 respectively, while Q

Speaker: 00:43:28

One traded up to 12,400. While the rates sold

Speaker: 00:43:32

in the afternoon, the curve closed higher than Friday closing

Speaker: 00:43:35

levels. And for your overview on the FFA market, we had

Speaker: 00:43:39

an extraordinarily busy week for Dry FFAs with daily

Speaker: 00:43:42

volumes surpassing 20,000 lots last Thursday and

Speaker: 00:43:46

Friday marking the highest future volumes week

Speaker: 00:43:49

ever, resulting in total trading volumes reaching nearly

Speaker: 00:43:53

97 200 lots. By vessel

Speaker: 00:43:56

size. Cape Futures saw the largest volume traded, averaging

Speaker: 00:44:00

8290 lots changing hands per day.

Speaker: 00:44:04

Panamax and Supermax has also experienced an uptick in trading

Speaker: 00:44:07

activity with an average of 6835

Speaker: 00:44:11

lots and 2960 lots traded

Speaker: 00:44:14

daily, respectively. Options trading was comparatively

Speaker: 00:44:17

moderate with 3150 lots cleared in

Speaker: 00:44:21

Cape and 1810 lots in

Speaker: 00:44:24

Panamax. In terms of contract periods, the primary focus of

Speaker: 00:44:28

interest was on December. Q One and Cal 24 to 25

Speaker: 00:44:32

contracts along with decent sizes traded in Jan. 24.

Speaker: 00:44:35

Q two through Q 424. That's it for this

Speaker: 00:44:39

week's dry Freight weekly report. It's time for your Ferris update with Hao

Speaker: 00:44:43

pay.

Speaker: 00:44:47

All right. Hal so, big news in the China

Speaker: 00:44:50

coking. Coal futures. We had an

Speaker: 00:44:53

8.13% increase during the past

Speaker: 00:44:56

two trading days. What's going on? Yeah,

Speaker: 00:45:00

it's quite abnormal because if we think about Ireland

Speaker: 00:45:04

market accrued oil like 8%, it's also abnormal.

Speaker: 00:45:08

But it happens sometimes in the year. It happens

Speaker: 00:45:11

every year, right. The craziest moment of two day or three day

Speaker: 00:45:15

growth, like 10%, I'm not surprised. But in

Speaker: 00:45:18

cocaine it's much more slower market than iron ore,

Speaker: 00:45:22

normally speaking. There must be something happened.

Speaker: 00:45:26

And yes, because some of the coal mine accidents in China in

Speaker: 00:45:29

November finally obtract attention from the government.

Speaker: 00:45:33

So the government started different groups of inspection teams

Speaker: 00:45:37

to supervise the production lines the miners and

Speaker: 00:45:41

to evaluate safety of miners. Well it doesn't say

Speaker: 00:45:44

anything about any impact of the Coking

Speaker: 00:45:48

coal or coal production but generally in the

Speaker: 00:45:52

market they believe that it has to some

Speaker: 00:45:55

direct production impact on the coke miners for

Speaker: 00:45:59

a long time. So that's why the futures

Speaker: 00:46:03

market bumped up ahead of any other products.

Speaker: 00:46:06

And following the futures growth we saw like there are two

Speaker: 00:46:10

rounds of physical coke price growth by 201

Speaker: 00:46:14

which account for roughly seven to 8% on the

Speaker: 00:46:17

physical market as well. So

Speaker: 00:46:21

this is pretty much the direct reason to support this growth.

Speaker: 00:46:25

I see. So this was a pretty

Speaker: 00:46:28

unprecedented step taken by the

Speaker: 00:46:31

government. Like no one in the market was expecting this. It sounds like

Speaker: 00:46:35

yes, because normally the government will send out

Speaker: 00:46:39

files and documents and talk to the miners leaders, probably

Speaker: 00:46:43

start inspections on the accidental minor. But instead

Speaker: 00:46:46

of the whole province and the and can take up to

Speaker: 00:46:50

from seven days to a month. But this time the and they

Speaker: 00:46:54

expected the supervision probably take like three months to six months.

Speaker: 00:46:58

So that's a lot so that's no one expected

Speaker: 00:47:01

before. So I think this is something it's totally out

Speaker: 00:47:05

of expectation of the market. So then do you think this

Speaker: 00:47:09

uptick will impact the Fob Australia Coking coal? In the long

Speaker: 00:47:13

run? The answer would be quite limited

Speaker: 00:47:17

and first of all we have to say it has an impact over the

Speaker: 00:47:20

Fob market because all the coal market is connecting the Asian

Speaker: 00:47:24

Pacific area. It's all SeaWorld and Coking coal but I think

Speaker: 00:47:27

it's limited. Well first of all, the tightened supply in

Speaker: 00:47:31

China's domestic cocaine coal result into an

Speaker: 00:47:35

import demand in November. So as Fob

Speaker: 00:47:38

Australia used to have 67 premium over

Speaker: 00:47:42

CFR China in early November but now it is only

Speaker: 00:47:46

$2. So which explained that China

Speaker: 00:47:49

import tentatively play a key role in the market of November

Speaker: 00:47:53

in the seaborne market coking co well in addition from

Speaker: 00:47:57

mid November India buyers are returning from holiday and

Speaker: 00:48:00

looking for restocking. The impact has already

Speaker: 00:48:04

linked to the seaborne market and probably seaborne market hao already

Speaker: 00:48:08

revealed what happened in China like a month before. So I think the

Speaker: 00:48:12

afterall impact and the after news

Speaker: 00:48:15

impact will be limited compared with last month.

Speaker: 00:48:19

And however, the steel margin in China and most areas in

Speaker: 00:48:22

Asia was quite negative. Thus if Fob went too

Speaker: 00:48:26

high they will look for alternatives and even think about

Speaker: 00:48:30

control production. If think about market share wise,

Speaker: 00:48:34

I think pricing will not be too

Speaker: 00:48:37

aggressive because the major Australian miners are listed the

Speaker: 00:48:41

companies they have to think about the market share

Speaker: 00:48:45

versus the earning margin at a time. In particular for

Speaker: 00:48:49

year end they need to optimize a financial balance

Speaker: 00:48:52

sheet and schedule income flows and they need to see numbers

Speaker: 00:48:56

like shipments target approach enriched instead of

Speaker: 00:49:00

selling into a high price and in particular

Speaker: 00:49:03

before because next month is the last month of the year and which

Speaker: 00:49:07

should consider some contributors to help with those

Speaker: 00:49:11

annual reports and the stock markets and investment

Speaker: 00:49:14

markets. So I'm trying to say is I think

Speaker: 00:49:18

it's better for miners to grab more shipments and sell more

Speaker: 00:49:21

cargoes instead of direct raise price for the Fob

Speaker: 00:49:25

market. So I think the impact from China's side

Speaker: 00:49:29

for this time will be quite limited. Okay but that

Speaker: 00:49:33

is for this time. So that means that we'll need another update

Speaker: 00:49:37

next week to see what else is going on in the yeah and see what

Speaker: 00:49:40

happens. Exactly. We need to follow this.

Speaker: 00:49:44

Thank you so much hao and we know that you will

Speaker: 00:49:48

keep your eagle eyes on this and keep us updated for next

Speaker: 00:49:51

week. Thank you. Well

Speaker: 00:49:55

you did it. You made it to the end of an action packed

Speaker: 00:49:59

episode and I congratulate you for that. But this

Speaker: 00:50:03

week instead of begging you to follow us on Apple podcasts spotify or

Speaker: 00:50:07

wherever you get your podcasts from or pleading with you to go to

Speaker: 00:50:10

freightuppodcast.com to leave us a review or comment, I'd

Speaker: 00:50:14

instead like to pay tribute to the investment guru and business

Speaker: 00:50:18

giant Charlie Munger who passed this week. With that

Speaker: 00:50:21

said, until next time amigos freight

Speaker: 00:50:25

up.