The mixed signals can’t get any more mixed, the Baltic Dry Index, which tracks rates to ship dry commodities, is up 3.6 per cent on Thursday to a new 4-month high. Here’s a historical chart for context.
The question is, is this really a sign of an early recovery, or is it just that dry commodities are too cheap not to buy now to restock inventories with. We note copper prices have also risen a corresponding 3 per cent in Thursday trade.
That said, naphtha prices also continue to rally in Asia as this report from Reuters confirmed on Wednesday:
SINGAPORE, Feb 18 (Reuters) – Asian naphtha cracks extended gains on Wednesday, as short prompt supplies caused by steady demand continued to support the bull-run which has persisted for nearly two months. “Logically, demand should have softened by now, as buying interest was expected to fall after the Lunar New Year festive period. But this has not been the case,” said a Singapore-based trader. Gasoline cracks, in contrast, are gradually easing as traders expect Reliance to start fuel exports from its new 580,000 barrels per day (bpd) from April.
More than a two-month rally in the price of naphtha, used for manufacturing plastics among others, does indeed in our opinion suggest some kind of sustained recovery.
Related links:
Shipping tides are turning for now – FT Alphaville