The number of dry bulk freight contracts traded via the Singapore Exchange (SGX) jumped 700% year on year to 14,154 contracts in April.
SGX said that open interest has almost doubled since the start of the year, averaging 32,218 contracts in April.
Open interest refers to the number of contracts outstanding in futures and options being traded at any one time.
SGX said, “While a seasonal improvement in demand provided some support for larger vessels, freight rates in general remain near multi-decade lows. Vessel demolitions are reportedly rising, though are yet to offset oversupply while demand has been unable to significantly lift rates. Numerous uncertainties plague the Capesize market.”
The Baltic Dry Index fell 2% in April, with mixed performance by underlying vessel class. Capesize and Panamax rates rose 19% and 10% respectively, as a seasonal improvement in demand for iron ore, coal and grains provided some support. Supramax and Handysize rates meanwhile fell 13% and 4% respectively. Freight rates were uncharacteristically stable during the month, with volatility at its lowest level in almost two years.
The April forward curves closed pricing in a relatively robust recovery for Capesize rates over the coming months, while expectations for other vessel classes remain more muted.
SGX added, “On the one hand, last month’s brief iron ore price rally may spur stronger seaborne shipments [Atlas Iron for instance reversed its decision to cease production after iron ore prices showed signs of a rebound]. On the other hand, Vale added to the market uncertainties stating it would consider shutting up to 30 million tonnes per annum of production in the event of further significant price weakness. With uncertainty over where supply cuts will come next, the playing field remains wide open on who stays and who goes in the iron ore market, and the implications for freight rates are significant.”
Across key dry bulk commodities, iron ore stockpiles closed the month at 97 million tonnes in China [3% lower than the end of March], and prices rose 10% amid higher Chinese steel output, mill restocking and improved sentiment in the Chinese property market.
In thermal coal, inventory at Chinese ports were reduced slightly in April, closing the month at below 31 million tonnes.
SGX noted, “Absolute stock levels remain high, and with domestic prices continuing to decline there have been few signs supporting a near-term resurgence in imports.”