FFA Update

Cape

After a period of optimism in the Cape FFA market, we have experienced a change in sentiment and as such now trend downward, lacking any significant buy side support. The index, having reached $30,944 on June 16th, now appears overvalued at $22,592, indicative of the disconnect we appeared to have between spot and front month TCs. The July contract trades now sub 18k, with Jul v Aug spread narrowing down from 2700 levels to trade 600. A similar story can be said for other time spreads, as Q3 v Q4 has widened and weakened from -750 to -1450, in a period of good liquidity prior to Q3 beginning to index. Some resilience can be seen on the Q4 contract, which appears to have market support from 19000, perhaps an even stronger shift in market fundamentals required to break that threshold. Cal’26 still has not deviated from it’s 17500-18000 range, consequently volumes remain steady on the deferred with limited volatility.

Pmx

Panamax FFAs have broken out of their confined ranges of recent weeks to display bullish signs, as we now begin to test contract highs in some cases. 4TC index has improved gradually, from $8631 at the start of June to $11489 at time of writing. Market support has taken July from 9300 at the start of the month to a high of 11450 seen this week, with July now trading at a $600 premium to August. Q3 similarly has strengthened, 10750-10850 trading range across the last couple of sessions, but ebbs and flows on the contract sentiment have prevented an exaggerated move to the upside. Q3 v Q4 has widened from flat to 500, although in a similar vein to capes, the deferred contracts lack volatility, and as such we remain range bound between 9750-9950 on Cal’26.

Smx

A similar pattern can be said on Smx as it can for Pmx, as we have seen a bullish market take us to contract highs down the curve, leading to increased liquidity. Having previously failed to breach 11000 on many of the contracts, that appears the floor on the market in most cases now. July is transacting 11100, while we have Q3 trading up at 11300 yesterday. Q3 v Q4 spread has improved from negative territory to 250, with financial flows aiding the spread from the buy side. Cal’26 has also seen good support trading at 10400 in recent days, it now remains to be seen if we can sustain these new levels.

By Greg McAndrew, Partner, Derivatives, SSY