Thread by @nikosbits

Time to discuss Dry Bulk freight:

I am aware that the audience is predominantly naturally bullish, otherwise why follow closely a sector in the first place. Some of my views might seem overly conservative/cautious; happy to hear thoughts that will make me change my mind.
1/n

Signs of a big correction were there, from mid-September. The Capesize market overshot, and got to $85k/day on the back of positional tightness caused primarily but not solely by weather and the massive spread between Brazil/Pac round which incentivized staying in the Pac
2/n

Iron ore nosedived, from 220 in mid-July to 100> in the first week of Oct. At the same time, c3 was at 50, lower grade long-haul started becoming uncompetitive. $Vale for example has spent years to get its cost at c.$20 so its main cost was by far freight
3/n

(Almost) everyone was of the view that Chinese rhetoric/actions wouldnt be as effective in the hot coal market as, to use a recent FFA line, it was tighter than a 🦀ass. Yet we saw a well-orchestrated attempt by 🇨🇳, immediately being successful in cooling-off prices by 50%
4/n

Positioning: A lot had been said on that, the mkt was long, and that a gamma squeeze was looming because of the OI in the FFA options mkt. To an extent this was true, BUT it is also a convenient excuse of what was/is really going.. A fig leaf hiding possible deeper problems.
5/n

Now at this stage one needs to distinguish between the short-term and the mid/long term outlook. Short-term the mkt looks scary. Ofc there will be periods of consolidation, days when the mkt will bounce,and people will need to hedge or try to pick the bottom bc of fomo
6/n

Money can be made trading such moves, and there are many traders whom i respect a lot, doing successfully exactly that day-in day-out. But in the grand scheme of things this is noise.
Even in this mkt which is very sentiment driven, fundamentals do prevail eventually.
7/n

What is,and will remain a positive aspect of the mkt is the supply side. Orderbook is and will remain at very low levels for the foreseeable future, for reasons that have been widely discussed recently.
EEXI and container orderbook covering yard capacity to name a couple.
8/n

The picture for the smaller sizes definitely looks a bit better. Coal and grains will move and minor bulks will provide bottom-up flow. If they can get further support from containers AND congestion issues remain unresolved (a big ?) the floor is higher than in recent past
9/n

To end, the picture is not all gloom and doom. However, the Capesize market has NOT found a floor yet. Believing so will surprise ppl negatively. Short-term disruptions will support the mkt but there are reasons indicating that we havent seen the worst for the year yet.
10/n

However, what im certain of, is that what one way or the other, this mkt will keep us on our toes, and will provide amazing opportunities within the next 6-12 months across all ship sizes.