The dry bulk market has been experiencing some positive momentum of late. In its latest weekly report, shipbroker Allied Shipbroking said that “the dry bulk market has moved on a positive track as of the past couple of weeks or so. Following the typical softening in freight conditions during the early part of the year, many would argue that this recovery of late has to some degree been anticipated. This, though, simultaneously raises the question as to whether we should remain bullish or not in the near term.

According to Alllied’s Research Analyst, Mr Thomas Chasapis, “to answer such a question, we must take a more comprehensive look. One of the tricky aspects of the current market’s momentum for example, is the level of disconnection exhibited by the Capesize market against those of the other size segments. This persistent “failing” of the bigger size segment to shape the overall signal the dry bulk sector within the current market regime is one of the most interesting angles to start with, given that it shows a shift within the traditional dry portfolio dynamics in terms of performance and risk metrics. Returning to the original argument, do we now have a better view of what we can expect in the sort-run?”

“The below graph gives some interesting ideas in respect to this. Having used the benchmark BDI and its derived Bollinger Band trendlines (using the typical 20-period SMA & +/- 2 standard deviation methodology), we notice that we currently stand at levels close to the upper band levels (for many, this would be considered as an overbought condition). At the same time, starting from the onset of the previous year, we also see that the index followed in most cases the “typical” shifts in trend when it reached either bullish or bearish crossover levels. However, there were many cases that the index touched the upper band, highlighting the strong uptrend that was noted throughout the previous year. Now, we are in a bullish crossover, that may me prove strong enough to push things even further, while being at the same time, attuned to the (periodical) mean-reverting idea of a market converging to its short-term balance levels. However, how probable is this scenario, given the current dissonant trajectory of the Capesize market?”, Chasapis wondered.

Source: Allied Shipbroking

“Finally, I would place the focus also on the global macro trends and the prolonged discussions regarding interest rates and inflation targets. Shipping markets are not immune to these changes, that fundamentally can alter dynamics in investment strategies, risk appetite and asset price levels”, Allied’s analyst concluded.

Marex Media