FFA Update

The FFA market has experienced extreme volatility and record volumes in recent weeks. This has been largely due to an unexpected push in the Capesize sector, which has seen the index move from $20,029 in late November to a high of $54,584 in early December. Thereafter the market priced in a significant drop, with both BOM December and January contracts significantly discounted. However, as time erosion and convergence take their toll and the Index remains firm, the curve has firmed again in recent days, notably widening and strengthening Jan / Q1 contracts.

Panamax paper has also seen increased trading activity, notably from grain hedging activity and inter-size spread liquidity from both Cape and Supramax. Large Index increases were also evident on the smaller vessel sizes, which topped out on Panamax at $20,630 and Supramax at $17,213. Despite dropping from the highs, both sizes have subsequently found a floor and robust support. As we approach the end of the year, demand looks to be strong, contrary to historical seasonality during this period. We expect a volatile and active year-end and start to 2024.

By Greg McAndrew, Partner, Derivatives, SSY