Dry Bulk Market Offers Reasons for Continued Optimism
The rally in the dry bulk market during most of the third quarter has offered owners of dry bulk carriers, many reasons to be optimistic about the long term sustainability of a new period of growth for the segment. In its latest weekly report, shipbroker Allied Shipbroking said that “a mere breath away from the start of Q4 and most (if not say all) parties involved in the dry bulk market couldn’t be anything less than happy with the current prevailing market conditions. With the BDI having reached new high levels (10-year high) at 4,275 basis points, while in the bigger size segment, TCA figures are once again above the US$ 50,000/day mark, a typical firm final quarter seems to now be the most plausible scenario”.
According to Allied’s Research Analyst, Mr. Thomas Chasapis, “in earlier market views, we mentioned that given the current freight levels in the dry bulk sector, 2010 seems to be a rather good fit as a base year, given its many similarities in terms of overall returns and performance metrics. At this point, we will use two different approaches to help us compare (and understand) the prevailing conditions, market potential, and hidden trends (if any), given what we have seen in the year so far. In terms of absolute statistics, 2010 presents itself as a more “appealing” year. A higher mean value for that year, as well as, lower volatility/risk profile (using standard deviation), higher yearly minimum figure, and relatively on par yearly maximum figure, are some of the core standards that converge towards the idea of a ‘softer’ trajectory in relative terms for today’s market. However, what about momentum and market sentiment?
Based on the above graph however, it looks as though the given current momentum in the dry bulk sector has created a much “stronger” expectation for the near term in a very short time frame. Using technical analysis and more specifically the Relative Strength Index, the bullish divergence (shaded area on the right) in the market in this year is seemingly apparent. The RSI, as a momentum indicator helps us understand relative overbought and oversold conditions, that a reversal in trend would be somehow expected. In 2021, we see that the corrective pullbacks after upward trends (theoretical ‘overbought’ conditions) are softer, while in 2010 we see periodical spikes followed by heftier bearish reversals. With all that being said, the market momentum and seasonality historical trends heavily hint towards a ‘long’ position for the remaining part of the year”, Chasapis said.
According to the shipbroker, in the Capesize market, “a strong rebound was seen this past week, with the BCI 5TC climbing to US$53,240, after the intense interest that was noted in the Australia-China iron ore trade. The very active market in the region boosted the trans-Pacific C10 route as well, posting a 26.3% w-o-w rise. At the same time demand for iron ore cargoes from Brazil was also robust. The result was the trimmed tonnage lists noted in the segment, allowing owners to push for much higher premiums”. Meanwhile, in the Panamax market, “the considerable upsurge of activity in the Atlantic basin helped rates to move upwards during this past week. The BPI TCA figure rose to US$35,138. The lack of available tonnage and the strong demand for minerals created an imbalance in the market in favor of the owners last week. Gains could be even stronger if Asia was more active, as demand there remained almost flat”, Allied said.
Meanwhile, in the Supramax segment, Allied noted that “in line with the bigger size segments, the market here also posted gains last week, with the BSI TCA rising to US$36,378. The solid demand in the Atlantic basin was the key driver here as well, as a fresh series of fixtures depleted available units in the region, with USG activity being especially robust. In the Pacific basin, things were quieter, but the available tonnage was also curbed last week due to weather conditions, lending some support to freight rates”, the shipbroker concluded.
Source: Hellenic Shipping News