The final quarter of the year started “with a bang” for the bigger size segment, with the benchmark TCA figure reaching new highs, while reaching close to its 2009 peak. A hefty trajectory for a segment that has been the year-to-date underperformer in the dry bulk market. Can this trigger another round of increase in asset prices as well? Using asset prices for 5-year old vessels as a benchmark, current price levels seem to be on the low side. This point is further enhanced, given the roughly US$ 10mill price gap with the 2009 levels, says an article published Capitallinkshipping.
The question is as to whether 2021 is at a discount or was 2009 an exaggeration? It is possible that the answer lies somewhere in-between. Technical analysis will point towards a bullish direction for asset prices, attuned with the overall sentiment. However, we shouldn’t neglect market “bias” which tends to usually accumulate from most recent memory of market performance. These are some of the reasons that we notice periodical paradoxes. In 2009, the upward continuation in asset prices held for a while, despite the clear correction noted in freight rates. It seems as though the market was confused, anticipating a quick recovery back to levels that had become the norm for so many years, while similarly asset prices were already at a perceived discount. The same paradox most likely took place in the summer of 2013. The market experienced a bull run in freight rates, with asset prices following with their typical time lag, but continuing on this same course for many months be- yond what the freight market did.
Under such logic, is it fair to assume a significant rally to take place in asset prices in soon. The momentum is there and is adequately supported by current market dynam- ics. However, if we want to have a clearer view of the market’s potential, we need to have a correct perspective of the current market’s “conservatism”. Whether it is a matter of more sluggish trajectory or a debate as to the potential duration of the rally, asset prices should eventually push further up. Yet their increased time lag, this time round, in reacting to the freight market seems to be excessive market resistance being faced as part of biased fears focusing on the market performance of the past 5 years.
Dry Bulkers – spot market
The intense demand for iron ore cargoes resumed for yet another week, giving a further boost to the freight market. The BCI TCA climbed to levels above US$80,00/day last week, nourished by very active Pacific and Atlantic mar- kets. In China, robust interest for fixing, mainly for cargoes from Brazil boosted freight earnings, as it was reflected in the 8% rise in the respective C3 route. The rest of key trade routes posted gains as well.
In contrast to the capes, a correction was noted in the panamax/ kamsarmax segment this past week. The BPI TCA figure slid to US$34,794/day, with the trans-Atlantic round voyage posting the greatest losses last week. The long tonnage lists noted in the region pushed premiums lower. Meanwhile, de- mand in the Pacific basin remained firm, despite the slow-down noted in activity.
The market here moved sideways once again, with the BSI TCA clos- ing the week slightly higher at US$37,585/day. The Golden week holidays in Chi- na affected the market, as lack of fresh enquiries trimmed freight rate premiums. However, the firm activity noted in the Atlantic helped the market overcome these losses and close the week with marginal gains.
Momentum in Handysize market lost some steam this past week, mainly due to the Chinese holidays, though overall interest remained firm. There- fore, the market closed the week with slight gains, as was reflected in the 1.4% rise witnessed in the BHSI TCA figure. The key driver this past week was the USG, where robust demand boosted freight rates. However, gains were curbed by the anemic interest noted from China.
Tankers – spot market
Crude Oil Carriers
A slight improvement seems to have started to take shape in the crude oil freight market, with sentiment though still remaining poor. The BDTI reached 680bp last week for the first time since the beginning of April. Despite the slight rebound in demand, the VL market remained subdued. However, some activity was noted in the MEG, leaving room for optimism. In the Suezmaxes, a considerable rise was seen in freight earnings, with the modest activity noted in the MEG and WAF being the key drivers. In the Aframaxes, there was also an improvement last week, as was reflected in the average TCE figure, which rose to US$3,426/day. Interest was enhanced in both the Cont and Med, giving a small boost to the market, while USG demand also showed some signs of a rebound.
It was a mixed week for both the DPP and CPP markets. On the DPP front, an active Med market was counterbalanced by a deteriorating interest in the ARA-USG trade. On the CPP front, overall gains seen due to a modest rise of demand were curbed by losses the CONT-USAC and MEG-JAPAN routes.
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