Baltic Freight indices are the highest they’ve been for 10 years. Freight’s rise has been as remarkable as many of the commodities that drive the market’s demand complex, but none more so than Iron Ore.
In Australian Official Treasury forecast papers dated as late as the 12th December 2020, officials noted that the Government thought Iron Ore prices would average 55 USD/mt FOB by the end of Jun’21. This week, Iron Ore spot prices achieved a record 193.85 USD/mt, topping the 2011 record of 193 USD/mt.
What’s more remarkable is the strength of the forward curve for Iron Ore. The average price for 2022 is trading hands at 140 USD/mt, with 2023 printing more than 120 USD/mt.
At the same time, Capesize is seeing strong demand and has been above its long term average of $10,000 per day for 300 days.
Similar to the Iron Ore market, Capesize futures glean confidence in the forward outlook for the sector, with futures trading at $19,675 and $17,675 per day for 2022 and 2023 respectively; almost twice the long term Capesize average earnings.
With a $2.25 Trillion infrastructure plan being tabled by President Biden, it’s not hard to understand why the forward curves for Iron Ore and Capesize markets are so bullish.
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