Freight rates plunges on sharp Yuan depreciation

The Baltic Dry Index (BDI) lowered to 1,712 reading on Wednesday, down 22 points or 1.27% on-day, due to market uncertainty over the sharp depreciation of Chinese Yuan.

On Monday, the Chinese Yuan dived to a 11-year low against the stronger US dollar, dropping past the threshold of RMB 7 per USD dollar and lowest since the global financial crisis year of 2008.

The sudden drop caught the market in surprise and fanned market fears on the advent of a currency war between China and the US, after seemingly no trade reconciliation among the two countries.

 

Iron ore market on free fall

The sharp depreciation of the Chinese Yuan brought a selloff in iron ore and rebar future market on Monday. As the higher currency exchange costs deterred Chinese trade participants from buying seaborne physical cargoes denominated in US dollar.

Similarly, Capesize paper market witnessed a sharp selloff in Monday which caught many trade participants off guard. By Wednesday, the Capesize 5 time charter average nosedived by $740 to $23,885 , down $1,734 since Monday’s rate of $25,619.

The slump in Capesize paper market weighed heavily on physical market. However, some miners were appeared to still be out looking for tonnage amid the low bunker prices environment on Wednesday.

 

Panamax finds support in good volume

Despite weaker Capesize paper market, the Panamax paper market saw gains across the curve as buyers chased the market up in good volume with the improved Atlantic sentiment.

Thus, the Panamax time charter average rose by $252 on-day to $14,320 on Wednesday, up $295 as compared to Monday’s rate of $14,025.

Meanwhile, Supramax paper market experienced a sharp drop on Monday before stabilizing later on Wednesday, with time charter average at $10,892, down $18 on-day. Handysize paper market was unaffected by Yuan depreciation, as the Handysize time charter average booked a gain of $18 to $7,655 on Wednesday.