Our updated forecasts represent a bit of mixed bag. The good news is our assessment of the fundamentals over the rest of the year, and the resultant price forecasts, see the market picking up significantly from where things currently stand, whether in the spot market or against the forward curve. Less positively, we have had to trim our forecast rates from the last set we produced, to account for the deepening impact of the US-China trade war, the slower outlook for the global economy and of course the outcomes of the Brumadinho dam collapse.

The tragic failure of Vale’s tailings dam at Brumadinho has been a key event in what was already a difficult start to the year for the freight market. But the dry market’s problems run deeper.

There is a steady stream of downbeat financial news at the moment as the economic cycles slows and the trade war bites.  But hidden amongst the stories there are a few positive indicators, with the potential to provide some fresh impetus for the freight market

The United States trade war is starting to bite hard, with the media and markets highlighting the big falls in the latest Chinese trade data for both exports and imports. This is worrying news for shipping, although it may strengthen resolve to reach a new U.S.-China trade accord later this month. But less widely reported, beyond the obvious soybean stories, is how Trump’s policies are impacting U.S. dry bulk commodities. Some of the shifts are subtle but there are some notable winners and losers.

Q1 is normally the most significant quarter of the year for vessel deliveries, as owners seek to get hold of their ships early in the year. During the four year period of 2015-2018, an average 37% of annual vessel deliveries were in Q1, 50% ahead of where it would be on a pro-rata basis. 

Given the lack of liquidity, its too early in the year to pass much comment on how the freight market is starting off for 2019, but overall 2018 proved tougher than expected. The hard won gains made through the first three quarters of the year were largely wiped out by a miserable Q4, resetting the market back to where it had been 12 months previously.

In a series of tweets this week during the G20 summit, president Trump indicated that China would restart imports of US agricultural products, sparking speculation as to whether we will soon see US—China soybean trade resuming.

-Rebar steel prices in China have fallen by over 5 per cent this week due to concerns over future demand
-The rebar spot price this morning sits at US $625/tonne
-Margins have also been under pressure but reducing prices in iron ore and coke this week has softened some of the fall
-In addition to expectations of weakening demand, supply expectations remain strong with mills producing at record levels
-With further expectations of more price falls on the horizon, steel traders are also reluctant to replenish inventories at the moment