Strengthening US dollar weighs on Commodity Prices

Freight up hello and welcome

back to Freight up. The Freight and Commodity podcast of Freight Investor Services. My name

is Jess and together with Davide, we will be your host as we navigate our

major freight and bulk commodity markets. We hope you enjoyed the US Election

special from two weeks ago today. We will begin with our Freight

Update followed by insights from Halpei on iron ore. Unfortunately, Archie

Smith will not be able to join us on fuel oil, so that section will

be missing from today's episode. But as usual, let's first look at the

latest news and index movements for the last two weeks.

In the U.S. the annual Core consumer price inflation rate,

which excludes items such as food and energy, stood at a three month high

of 3.3% in October, unchanged from September

and in line with the market estimates. The annual inflation

rate accelerated to 2.6% in October, up from

2.4% in September, which was the lowest rate

since February 2021. And in line with market

expectations, China's annual inflation rate stood

0.3% in October compared with market

estimates and September's figure of 0.4%.

This marked the ninth straight month of consumer inflation, but the lowest

reading since June. The British economy

unexpectedly contracted 0.1% month over month

in September, the first decline in the last five months following

a 0.2% rise in August and well below the market forecast

of a 0.2% expansion. However, the

economy expanded 1% on a year on year in the third quarter of

2024, the strongest growth rate in seven quarters compared

to 0.7% in Q2 and in line with market

expectations according to the preliminary estimates.

What about the market movements of the last two weeks? Let's

take a quick look. Looking at the cape size, the C5TC

index has gained considerable ground over the past two weeks, jumping

from $16,310 of the 5th of November to

the 23rd, $291 of the 19th.

Panamaxs have traded instead in a narrow range, losing

$200 in the last two weeks. The P5TC

index hit $10,536 yesterday from the

10,722 of the 5th.

Supras have been on a downward trend and the S10TC

index reached $10,596 from

the $12,319 of the 5th.

Same goes for the Hyundai's where the HS70C

went from $12,789 of the 5th of November

to The $12,207 of the 19.

And now let's have A look at what's happening in the dry FFA market

so the Cape FFA saw a resurgence in the week following our last

episode, with rates climbing by around $4,000 between

November 4 and November 8. After the US election results came

out, we saw steady bid support pushing December contracts up from the

Monday open at $20,275 to

Friday close at

$24,125. Similarly, the

November contracts rose from 17,800 to

$20,750 over the same period.

As for the last week, we saw further momentum in December contracts

opening Monday at $25,000, up almost 1,000

from Friday's close, buoyed by strong Pacific demand, especially on the

C5 route. By Wednesday, the market continued the

week's volatility, with November dropping to

$22,800 and December to

$25,250 before buy side

interest took over, pushing the November back up to

$23,000 and December to

$26,600. Further along the curve, we saw

Q1 contracts trade at $15,750 and Cal

25 at $21,200. By

Friday, December settled at

$27,325 with the end of the week largely

range bound. However, this week has brought some losses, with both November and

December slipping to $21,625 and

$23,625 respectively when I

checked last night. Moving on to the Panamax market, we

saw a more tempered rise compared to the larger ships.

Rates nudged up during the week starting November

4, with the December contract moving

from $10,750 to

$10,800, while Q3.25

moved from $11,775 to $11,950.

Cal 26 and Cal 27 remained

largely flat with $11,350 and

$11,425

respectively, so most contracts appeared to reach highs on Election

Day and correct over the rest of the week. Early gains were seen

at the beginning of last week. On November 11, the December

contract had reached highs of 11,400, but by Wednesday

the market was back in decline. Tuesday saw a correction

with December initially trading at

$11,750 and Q1 at

$10,450 before both fell to

$11,200 at

$10,250. A range bound

close capped the week off with November and December ending on their lows at

$10,700 and $9,750

respectively this week has continued with a significant sell

off on Monday. December dropped $600, finding

resistance at the $10,000 mark,

but by yesterday rates had broken through that level with December at

$9,500 yesterday

evening. And finally for the supermaxes, they've also

been on a generally downward trajectory. In the first week since our

podcast, we saw a steady decline totaling around

$1,134 between the 4th and the 8th of

November. On November 4th there was limited trading

activity and saw highs of

$12,425, but the market

remained range bound with the November and December contracts slipping back to

$12,200 and $12,450

respectively by the end of the week. Most volume was in the longer dated

contracts with both November and December ultimately trading at

$11,750 and $12,000.

Last week the market continued to face headwinds from soft demand and

rising vessel availability. Monday's trading saw November in

a $250 range and December in a $300

range, opening at high of $11,875.

Just to clarify, that was the December contract. Most trading activity was on

the back end of the curve with Cal 25 seeing

significant volume at around $11,800

to $11,900. Rates continue to

soften with November and December hitting lows of $11,250 and

$11,300 by Wednesday. The

downward trend extreme extended to the back end of the curve and Cal

25 slipped to $11,750 by

Friday. December had closed the week at its lows at

$11,225 while Q1 was also

down at $10,275.

So far this week we've seen similar downward

movement as larger vessels across all the Supermax contracts, with the

December having dropped $700 since last Friday

and have reached a low of $10,575

last night. As for volumes, the dry FFA

market saw robust activity last week with total weekly

trading volumes rising to nearly 76,000 lots.

Capesize contracts dominated trading with an average of

6,380 lots per day, followed by Panamax

and supermax contracts at 4,840 and

1,570 lots per day respectively.

Options activity was also notable, particularly in the Capesize

contracts which recorded 3,580 lots traded

compared to 270 lots in the Panamax and even less on the

Supras. I believe that was coming in around 30 lots, a

sharp increase In Panamax, open interest was also observed last

week aligned with a decline in the December prices suggesting

that short positions were built up while for the Capes open

interest grew a slower pace as weekly prices remained a bit more

steady, potentially signaling a pause to the recent bullish

momentum. Next up we have how

pay from Shanghai who will talk us through

what's been happening in iron ore this week. So we have seen

a 2.13% decrease in the iron

ore index in the last reporting week. However, there was a

fast rebound during the first two days of the week. Can you explain to me

what happened there? And I think first of all luckily

we were on the right pace of making assumptions instead of a wrong

pace when some of the financial sector were raising on a growth

after US election when the growth global interest cut

lending concentrate late China stimuli and we were very

early research team to give bold verdict that the market

should be overheat. Correction was needed last

week and then from this week we're suggesting

it over pessimistic on the downside. I

think the downside is there is more support instead of

risk and there were many main factors contributing to

the significant decline in the last reporting week

but almost nothing to do with fundamental market And I think

first the geopolitical geopolitic risks

potentially came to a quiet period after US

election and secondly the increase in tariffs in

some commodities led to the market tension and

anticipating trading a flowering price for export

volume in November to exchange more trading volume.

And thirdly the US Fed began to expect

the slower pace of interest rate cuts and

the strengthening of US dollar thereby suppressing the

performance of most of the industrial

commodity prices. And from history the steel market in fourth

quarter has never lacked of macro level stories like for

example there's bigger than expected process in the issuance

of 2000 billion won of local government investment

bonds in China during this weekend which boosted the

market conflict of economic situation

and the property market. So that's the story why the

market has seen a rebound over this week and I think more

to come and the government is saying there's a meeting from China

and DRC saying that China will fulfill the

GDP growth target of this year. If we think that's just if we think

it like a simple math calculation for the

first three quarters the growth rate was only

4.8. So given the whole year target is

5% that means the fourth quarter have to

reach like 5.6% of growth. That's a lot. That's almost

1% of growth compared to the past nine months. So in

general we maintain a range bond trading suggestion. So in

general I think the market expects some of the more stimulus

and more price pickup on the industrial in the

fourth quarter and I think following a strong directional

move and see if there's any chance to catch the

upside trading opportunities I think it's very

proper decision or very they had a safety margin

for this like trading pattern. Okay. And then for the

coking coal market it was quiet at around 201

to 203 dollars for many weeks. Do you see

the possibility of any directional opportunities there?

I think first of all the market saw less demand on the prime

coal approaching the end of year and the market

was expecting the Indian buyers to show

more during October but they just

stay sightlined. And on the other side I think the miners and

traders would rather keep cargoes on floats or ports instead

of sell them lower price. I think on both

sides, both supply and demand, they're slowing down in the market activities.

From that perspective I don't think the market will have a

huge change or any of the directional change

on the FOB coking coal market. There is news

that China cut physical coke price for the third round

and however I think market participants think it should be

hard to see the fourth round. So I think that news is

neutral. So I in general I don't think there will be any

directional opportunities for the coking co market. Okay, well

thank you very much HAU as usual given everybody a lot to think about. Thank

you. And that's it for this week. Make sure

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