1 February 217 SGX Freight Monthly Report January 217 Market Overview SGX freight derivative volumes totaled 3,591 contracts in January (-5% m/m; -34% y/y), while open interest averaged 88,539 contracts during the month (-3% m/m; +3% y/y). The Baltic Dry Index declined 17% during January, its second consecutive month of declines, though Panamax rates notably bucked the trend rising on stronger grains trade. Despite the seasonal declines across other vessel classes, rates largely exceeded the more bearish expectations for the month. As the dry freight market looks to beyond Lunar New Year for direction, seaborne coal trade remains a key area of uncertainty for 217. Our latest industry survey indicated expectations that Chinese coal output restrictions will likely be enforced again from the spring, casting a cloud of uncertainty over seaborne demand in the months ahead. SGX Freight Derivatives Freight volumes in January totaled 3,591 contracts (-5% m/m; -34% y/y), while open interest averaged 88,539 contracts (-3% m/m; +3% y/y). Freight Derivative Volumes by Contract Type contracts 8, Options Futures & FFAs 7, 6, 5, 4, 3, 2, 1, Freight Derivative Open Interest by Contract Type contracts 14, 12, 1, 8, 6, 4, 2, Options Futures & FFAs *SGX freight swaps & futures are fully fungible and include full margin offset. Details on margin requirements are included at the back of this report
Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-2 Jun-2 Oct-2 Feb-21 Jun-21 Oct-21 Feb-22 Jun-22 Oct-22 Freight Derivative Volumes by Product contracts C5 3A 2A 8, HV SV PV 7, CV/CW 6, 5, 4, 3, 2, 1, Freight Derivative Open Interest by Product contracts C5 3A 2A 14, HV SV PV 12, CV/CW 1, 8, 6, 4, 2, BDI sees seasonal pull-back in January; grains boost Panamax rates The Baltic Dry Index (BDI) ended the month down 17% in January, though remained more than double that of Jan 216. Panamax rates bucked the trend of dry freight winter blues, increasing 12% during January on stronger grains trade. Capesize rates declined 16% during the month, while among smaller vessel classes Supramax and Handysize rates declined 25% and 33%, respectively. In spite of the general decline in most spot rates during January, rates largely exceeded more bearish expectations for the month, most notably in the Capesize and Panamax market. The spot Cape/Panamax ratio closed January at 1.23x, versus 1.63x a month ago (LTM avg.: 1.44x). 3 Baltic Freight Indices 2% Freight Rate Volatility 25 2 15% 15 1% 1 5 5% % Capesize Panamax Supramax Handysize Capesize Panamax Supramax Handysize Source: Baltic Exchange, Bloomberg, SGX Freight Forward Curves Source: Baltic Exchange, Bloomberg, SGX Capesize-Panamax Ratio Capesize (5TC) Panamax Supramax Handysize 4.x 3.5x 3.x 2.5x 2.x 1.5x 1.x.5x.x Cape/Panamax Ratio Upper Limit Lower Limit Source: Baltic Exchange, SGX Source: Baltic Exchange, SGX 2
Coal to remain key uncertainty for dry freight in 217 Stronger-than-expected seaborne coal trade, following implementation of domestic output restrictions in China, was one of the main surprises in the dry freight commodity suite last year. Looking forward, that same dark cloud of uncertainty is likely to linger over 217. Our latest industry survey revealed widespread expectations that China s 276-day production restrictions will likely be resumed from the spring, with uncertainty over the impact on import demand as central policymakers adjust production and prices to their desired levels. Meanwhile, Indian import demand is also likely to hinge on domestic production. Across key dry bulk commodities, iron ore stockpiles at Chinese ports continued to trend higher to a record high of around 12Mt, while iron ore prices defied bearish expectations and remained around the $8 per tonne range for second consecutive month. Thermal coal inventory at Chinese ports on the other hand declined through the course of January. Seaborne thermal coal prices pulled back moderately, though NEWC prices remained comfortably above $8 per tonne. 12 115 11 15 1 95 9 85 8 75 7 Chinese Iron Ore Inventory at Ports 35 3 25 2 15 1 5 - Chinese Thermal Coal Stocks at Ports Source: Bloomberg, Steelhome, SGX Source: Bloomberg, Steelhome, SGX 8 7 6 5 4 3 2 1 Australian & Brazilian Iron Ore Exports 4 35 3 25 2 15 1 Indonesian & Australian Coal Exports Australia Brazil Indonesia Australia Source: Bloomberg, Australian Bureau of Statistics, Ministerio do Desenvolvimento Source: Bloomberg, Australian Bureau of Statistics, Indonesian Badan Pusat Statistik 3
Margin Requirements (as of 1 February 217) Contract Name Currency Contract month (From) Contract month (To) Maint. Margin Initial Margin Time Charters Capesize Time Charter Basket USD Feb-17 Mar-17 2,5 2,75 Capesize Time Charter Basket USD Apr-17 Jun-17 2, 2,2 Capesize Time Charter Basket USD Jul-17 Sep-17 1,3 1,43 Capesize Time Charter Basket USD Oct-17 Dec-17 1,3 1,43 Capesize Time Charter Basket USD Jan-18 Dec-99 2,7 2,97 Panamax Time Charter Basket USD Feb-17 Mar-17 1,2 1,32 Panamax Time Charter Basket USD Apr-17 Jun-17 9 99 Panamax Time Charter Basket USD Jul-17 Sep-17 7 77 Panamax Time Charter Basket USD Oct-17 Dec-17 65 715 Panamax Time Charter Basket USD Jan-18 Dec-99 1, 1,1 Supramax Time Charter Basket USD Feb-17 Mar-17 8 88 Supramax Time Charter Basket USD Apr-17 Jun-17 75 825 Supramax Time Charter Basket USD Jul-17 Sep-17 6 66 Supramax Time Charter Basket USD Oct-17 Dec-99 75 825 Handysize Time Charter Basket USD Feb-17 Mar-17 5 55 Handysize Time Charter Basket USD Apr-17 Jun-17 4 44 Handysize Time Charter Basket USD Jul-17 Sep-17 31 341 Handysize Time Charter Basket USD Oct-17 Dec-99 35 385 Specific Routes Oct-16 Dec-16 4 44 Panamax Route 2A USD Feb-17 Dec-99 1,3 1,43 Panamax Route 3A USD Feb-17 Dec-99 7 77 Capesize Route C5 - West Australia/ Qingdao USD Feb-17 Mar-17 4 44 Capesize Route C5 - West Australia/ Qingdao USD Apr-17 Jun-17 5 55 Capesize Route C5 - West Australia/ Qingdao USD Jul-17 Sep-17 6 66 Capesize Route C5 - West Australia/ Qingdao USD Oct-17 Dec-99 6 66 *Margin offsets are available for opposite swap/futures positions in the same underlying commodity ** SGX margin schedules are revised regularly. Latest schedules can be found on our website here SGX Freight Top 5 Inter-Dealer Brokers Q4 216 IDB Clarksons Platou Futures Freight Investor Services Ltd GFI Group Pte Ltd ICAP SSY Futures Ltd *Brokers listed in alphabetical order 4
Cross-Product Margin Offsets (as of 1 February 217) Products Margin Offset Freight Capesize time charter - 4TC Capesize time charter - 5TC 75% Panamax route P2A Panamax route P3A 65% Panamax route P2A Supramax time charter 6% Panamax route P3A Supramax time charter 6% Panamax time charter Supramax time charter 6% Panamax route P3A Panamax time charter 6% Panamax time charter Handymax time charter 55% Capesize route C5 Supramax time charter 55% Panamax route P3A Handymax time charter 55% Panamax route P2A Panamax time charter 55% Capesize time charter - 5TC Panamax time charter 55% Panamax route P3A Capesize route C5 5% Capesize route C5 Panamax time charter 5% Capesize route C5 Capesize time charter - 5TC 48% Panamax route P2A Capesize route C5 45% Panamax route P2A Handymax time charter 45% Supramax time charter Handymax time charter 45% Capesize time charter - 5TC Supramax time charter 42% Capesize route C5 Handymax time charter 4% Capesize time charter - 5TC Handymax time charter 4% Capesize route C5 Capesize time charter - 4TC 35% Panamax route P3A Capesize time charter - 4TC 3% Panamax route P3A Capesize time charter - 5TC 25% Panamax route P2A Capesize time charter - 4TC 25% Panamax route P2A Capesize time charter - 5TC 25% Capesize time charter - 4TC Supramax time charter 5% Panamax time charter Capesize time charter - 4TC 5% Iron Ore Panamax time charter Iron Ore 58% Fe 45% Capesize time charter - 4TC Iron Ore 58% Fe 45% Capesize time charter - 4TC Iron Ore 62% Fe 45% Capesize time charter - 5TC Iron Ore 62% Fe 4% Capesize time charter - 5TC Iron Ore 58% Fe 4% Panamax time charter Iron Ore 62% Fe 4% Capesize route C5 Iron Ore 62% Fe 35% Capesize route C5 Iron Ore 58% Fe 3% Coking Coal Panamax time charter Coking Coal - FOB Australia 4% Panamax time charter Coking Coal - CFR China 4% Capesize time charter - 4TC Coking Coal - FOB Australia 3% Capesize time charter - 5TC Coking Coal - FOB Australia 3% Capesize time charter - 4TC Coking Coal - CFR China 2% Capesize time charter - 5TC Coking Coal - CFR China 2% Thermal Coal Panamax time charter Thermal Coal - API4 & API5 45% Panamax time charter Thermal Coal - Indo Sub-bit 4% Capesize time charter - 4TC Thermal Coal - API4 & API5 35% Capesize time charter - 5TC Thermal Coal - API4 & API5 35% Capesize time charter - 5TC Thermal Coal - Indo Sub-bit 2% Capesize time charter - 4TC Thermal Coal - Indo Sub-bit 2% Steel Panamax time charter HRC Steel 45% Capesize time charter - 4TC HRC Steel 35% Capesize time charter - 5TC HRC Steel 35% Fuel Oil Panamax route P3A Fuel Oil 18cst & 38cst 55% Supramax time charter Fuel Oil 18cst 55% Handymax time charter Fuel Oil 18cst 5% Capesize route C5 Fuel Oil 18cst 5% Panamax time charter Fuel Oil 18cst 5% Handymax time charter Fuel Oil 38cst 45% Panamax route P2A Fuel Oil 38cst 45% Panamax route P2A Fuel Oil 18cst 4% Capesize route C5 Fuel Oil 38cst 4% Capesize time charter - 4TC Fuel Oil 18cst 4% Capesize time charter - 5TC Fuel Oil 18cst 4% Capesize time charter - 4TC Fuel Oil 38cst 4% Capesize time charter - 5TC Fuel Oil 38cst 4% Supramax time charter Fuel Oil 38cst 4% Panamax time charter Fuel Oil 38cst 35% *Margin offsets are available for opposite swap/futures positions in the same underlying commodity ** SGX margin schedules are revised regularly. Latest schedules can be found on our website here 5
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