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Baltic index falls on weaker demand across vessels

Source: Hellenic Shipping News Worldwide, September 7, 2019

The Baltic Exchange’s main sea freight index continued to fall on Friday, having broken a 10-day winning streak on Thursday, as rates throughout vessel segments eased.

The Baltic index, which tracks rates for ships ferrying dry bulk commodities, fell 37 points, or 1.5%, to 2,462 points.

The index on Wednesday hit its highest since Nov. 2010 at 2,518 points. It has nearly doubled this year.

The capesize index dropped 87 points, or 1.7%, to 4,949 points, but marked its fourth consecutive weekly gain.

Average daily earnings for capesizes, which typically transport 170,000-180,000 tonne cargoes such as iron ore and coal, fell $723 to $36,921.

The panamax index fell 18 points, or 0.8%, to 2,216 points, registering its first weekly fall in five weeks.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, fell $143 to $17,755.

The supramax index inched down 10 points to 1,338.
Source: Reuters (Reporting by Anjishnu Mondal in Bengaluru)

Easing liquidity drives volatility in Asia fuel oil paper markets (6)
A decline in liquidity in the Singapore high sulfur fuel oil derivatives is adding to volatility in the market ahead of the IMO 2020 regulations, said market participants.

The International Maritime Organization’s mandate for using cleaner marine fuel is set to kick in from January 2020. Demand for HSFO as a bunker fuel is expected to drop drastically from next year as the market switches to 0.5% sulfur marine fuels.

“The HSFO paper market has been volatile for the last two and a half months,” said a Singapore-based derivatives trader. “I think the market has a lack of liquidity so when someone needs to buy it ramps up quickly, and when someone needs to sell it goes [down quickly too].”

The M1/M2 380 CST time spread, which was trading at around $18.5/mt at the start of July, soared to more than $38/b, before falling to $12/mt mid- August. Since then, the spread has soared back again to a record high of $39.25/mt by end August, and was recently trading at around $32/mt, according to data from S&P Global Platts.

Meanwhile, the front-month Singapore 380 ST crack spread against Dubai futures, that traded close to $4/b in July, fell sharply to minus $13/b earlier this week, Platts data showed.

“The recent sharp sell-off and rebound in HSFO cracks is a cautionary preview of the volatility that the IMO 2020 bunker regulation is likely to bring to product markets early next year,” analysts at Goldman Sachs said in a client note on Thursday.

The volatility in fuel oil derivatives, especially for time-and crack-spreads, is forcing many to stay on the sidelines, driving down trading volumes overall, traders say.

Along the Singapore HSFO forward curve, the total open interest from Month 2-Month 10 contracts for Singapore HSFO futures recently fell to its lowest level this year. On August 30, the open interest for Month 2-10 stood at just over 38 million mt. Open interest for the same contracts was last lower at about 35 million mt as of September 30, 2018.

On the other hand, trading interest is picking up for the Marine 0.5% FOB Singapore contract both on exchange and over-the-counter markets, traders say.

“For sure there is some [paper trading] volume being migrated to gasoil directly or to the MF 0.5%/380 CST HSFO spread, ” said another Singapore trading source.

Total open interest for the spread between Marine Fuel 0.5% Platts FOB Singapore/ 380 CST Platts Singapore as of August 30 stands at 1.438 million mt, ICE data earlier this week showed.

Bid and offer values for forward months spread and inter-month spreads between Marine 0.5% Fuel/380 CST have also started to appear from October 2019 all the way to Q4 2020 on ICE.

Marine Fuel 0.5% derivatives financially settle on the monthly average of Platts Marine Fuel 0.5% cargo assessments.

News Source: S&P Global