Capesize freight rates extended losses after a string of selloff, amid weakening physical market.
The Capesize 5 time charter average, then plunged down by $1,409 day-on-day to $31,376 on Tuesday, following another selloff in the paper market.
The Baltic Dry Index (BDI) then dropped down by 2.23% day-on-day, down 71 points to 3,119 readings, due to softening freight rates.
Physical market has yet to find a floor
The sharp drop in the FFA market reflected the weak physical market with falling freight rates, which some trade participants felt that it had yet to find a floor.
Oversupply of tonnage continued to put pressure on freight rates, while demand was thinned with few fixtures done at the Pacific and the Atlantic basins.
However, some trade participants were more optimistic and believed the supply overhang situation to improve soon, due to less vessels ballasting toward the west of Singapore recently.
Other market participants were more bearish citing lower steel demand in China and bookings done at lower rates due to lack of fresh shipping demand.
Bunker prices draw support from strong crude
The bunker prices continued to draw strength from firmer crude market, as the price of VLSFO surged up by $4.50/mt to $534.50/mt in the port of Singapore.
Market sentiment remained bullish despite recent hiccup in the crude prices rally that dipped below the $75 per barrel level, before rebounding up again.
However, trade participants remained hopeful of the economic recovery in the US and Europe may push demand further, while US crude inventory was expected to drop for the fifth consecutive week, fueling the market optimism further.