Weekly Market Analysis

Weekly S&P Market Report, Week ending March 30,2018 (Week 13, Report No 13.18)

Dry Cargo
Another week with staggering rates for Capesizes, softening earnings for Panamaxes and steady ones for Supramaxes. Australia and Brazil iron ore exports currently don’t provide a firm support for tonnemiles. This loose picture is also supported by the fact that spot Australian iron ore price has dropped almost 15\% since the beginning of March. Nonetheless, if the drop in Chinese flat and construction steel stockpiles carries on, it could signal the start of construction activity. This, along with the fact that Chinese government wishes to keep steel mills’ profit margins at sustainable levels, by retaining a steady price differential between iron ore and steel, could help market to become bullish.

A worrying factor steaming from US tariffs could possibly affect heavily the scrap market. What remains to be seen is whether the excess supply of steel from China will be supplied to continent market, causing the steel prices to collapse. India is somehow protected against a supply glut in their market, mainly due to the imposed tariffs on steel originating and exported from China. But how much the other market will be affected is something that will see in the long term.

Wet Cargo

This week we have witnessed an improvement in the crude oil market, mainly supported from the improved earnings for the VLCCS in WAF-East routes. However, this improved picture doesn’t provide an indication for the behavior in the market in the long term, since winter has already passed for the Northern Hemisphere, and seasonally the market drops until the 3rd quarter. What remains to be seen is how fast-rising output from US shale will cap prices and how intensively scrapping activity will continue. Based on our records, 18 VLCC’s have been sold for scrap since the beginning of the year, whereas for the same period in 2017, 2 vessels only have reached sub-continent beaches.

GOLDEN DESTINY Research & Valuations Department