Cape FFAs in turmoil as volatility returns

Cape FFAs in turmoil as volatility returns

The cape FFA market is experiencing “turmoil” as the year comes to a close, with brokers Allied noting in their most recent weekly report that volatility for capesizes on a month-for-month basis has “skyrocketed” by almost 184%. Experts at London-based Freight Investor Services and Maritime Strategies International (MSI) caution however that volatility is to be expected and the outlook is more favourable for the start of 2019.

Allied stated that the downward spiral seen in cape FFAs of late has brought back memories of the 2016 collapse of the sector.

“The FFA market is now in a state of turmoil, showing steep corrections in respect to forward returns, even for very forward contracts,” Allied noted, saying this had brought an end to a long period of convergence towards more stable earnings.

“For the time being the market is once again covered in shrouds of uncertainty, with most interested parties having already altered towards a more conservative attitude,” Allied continued.

Freight Investor Services (FIS) in a research note yesterday observed that December futures are seeing 10-day historical volatility levels rise to a “staggering” 171%.

“Volatility is here to stay, and it has just given us a little reminder just how temperamental it can be,” FIS stated.

Analysts at MSI meanwhile have forecast spot earnings in January and April that are far more positive than FFA contracts at $16,200 and $18,000 respectively compared to $11,5000 and $12,200 a day on the FFA market.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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