Following a rapid ascent to almost 35,000 in less than two weeks’ time, Capesize rates are currently retreating in what one can describe as a moderate correction (for now), given the previous intensity and magnitude of the increase in the spot market.
The futures market has been pricing such a correction since the beginning of the rally as market participants remained extremely cautious of any increase beyond the highs of the recent trading range, and thus futures prices have retreated to a lesser extend compared to spot.
Once again, we tend to differ: We expect spot rates to bottom soon and turn back up, a scenario that is essentially fully rejected by the futures market. After all, with spot in the mid/high 20,000 level and November/December futures in the high teens, there is no room for error in the market’s relentless bearish attitude, while if one looks at first quarter futures, which are currently priced in the single digits, it is as if the last six months have just been an outlier in the ever depressed state for dry bulk of the past decade.
Capesize spot rates are currently about 27,000 while Panamax rates are averaging just below 12,000.
Source: Breakwave Advisors
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