Dry Bulk Market: Where to From Here for The Capesize Segment?

Dry-Bulk-Market-Where-to-From-Here-for-The-Capesize-Segment-3026.jpg      Dry Bulk Market: Where to From Here for The Capesize Segment?

A less than impressive first half for the capesize segment, leaves ship owners with mixed feelings ahead of what’s expected to be a crucial second part of the year, which is filled with challenges, most notably the looming trade war between USA, China and the EU. In its latest weekly report, Allied Shipbroking noted that “having reached the mid-point in the year, it seems to be a good time to summarize the overall trends noted in the Dry Bulk sector and more specifically the Capesize market, while looking to get a feel as to what we can expect during the second half of the year. All-in-all, it has been a rather interesting half, with a considerable amount of volatility, underlining how fragile the market balance remains and how vulnerable it is to small shifts in trading trends”.

“Indicatively, the BDI finished June at 1,385 points, a level which is just above the 1,366 points which it closed off the previous year, whereas contrary to this, the Capesize index, which tends to be the main influencing size segment, finished at slightly softer level, reaching the 2,170 point mark, compared to the 2,830 basis points it ended off in December 2017. This is a considerable drop, though worth mentioning that it is still well above its 6-month average figure”, said the shipbroker.

So where does all this leave us now? Are we going to be able to see a strong rally in the final quarter of the year that will help us brake above the 4,000 point mark on the BCI? Or is the capsize market going to suffer from the global economic and political turmoil at play, leading it to a perpetual motion between the 800 and 3,000 point level for the remainder of the year? According to Mr. Thomas Chasapis Research Analyst, “the answer may lie somewhere in between, given the multiple influencing factors currently at play. On the Iron ore front, China, just had its best month in terms of imports, probably well above 90 million tons, an important figure when you take into account the fact that China is by far the largest importer”.

Moreover, as Chasapis said “coal, the second main commodity for Capes, has been showing a remarkable rise in trade volumes in the year so far (as has been pointed out in previous weeks) and given the recent positive trends noted in terms of pricing of the commodity, shows for an equally promising performance over the months ahead. The caveat here is that both these commodities are highly dependent on steel production and although steel output figures in China are around 5% higher compared to last year, they are also highly susceptible to the risk of any dampening effect the recent trade war tariffs could eventually have on the steel products trade. Taking note of the overall balance at play in the market it is important to note that the Capesize fleet development has been holding at a modest level of around 1.02%, well below what was being noted in the year prior”.

He went on to note that “given all this and even when taking into account the risk overhang on trade, it looks as though a more attuned supply demand balance may well still be at play. With all being said, the first half of 2018 has left us with an eerie feel, with the intense ups and downs noted in the market being the cause of increased uncertainty. We can anticipate that for the rest of the summer period, things will be moving in a similar pattern to what we have witnessed so far in the year. Most will be likely focusing on the final quarter of the year, which is traditionally the most bullish seasonal point for Capesize vessels. As to if the market will be able to break above its previous highs during the fourth quarter, it looks as though most market thoughts are in favor of such an outcome at this point. Though all this would depend largely on the current trade trends being sustained and not so susceptible to any geopolitical interruptions at play”, Allied’s analyst concluded.
Soure: Nikos Roussanoglou, Hellenic Shipping News Worldwide

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