Decision On Commodities Prices A Blessing For the Dry Bulk Market?

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China’s signal to speculators may well support dry bulk freight rates, says an article on Lloyds List.

Prices may go down

China’s recent comments aimed at bringing down super-hot commodities prices may turn out to be a blessing for the dry bulk market. Remarks by the National Development and Reform Commission, remarks were seen as a warning to those taking large positions in the paper market for commodities ranging from iron ore to copper and steel, which had seen a bull run to record highs over recent weeks Shipping Strategy.

The signal to market participants “do not stop people from trading the physical, but rather to curtail volumes from the futures market, the effect of which may be to encourage people to buy more imported commodities, which will help push up freight rates,” the UK-based
consultancy’s founder Mark Williams said. While May has been a quiet month due to various holidays around the world, June, and July may “roar back,” he said, adding that the second
half of the year will turn out to be busier. The Baltic Dry Index could even breach 4,000 points, the first time in more than a decade, according to Mr. Williams. US-based Breakwave Advisors said the biggest risk to the dry bulk rally is China’s intervention to cool the markets.

The steel industry has seen a sharp increase

The Capesize segment appears to be “the least supportive and the most vulnerable” to China’s clampdown on sky-high commodity prices, relating mostly to its steel industry, which has seen sharp increases this year, it said.

With more than 60% of demand coming from China, dry bulk remains highly dependent on the country’s imports and any indication of a pullback will filter through to the dry bulk market in the first instance, it added.

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Source: Llyods List

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