SGX Freight Monthly Report – July 2016

• SGX freight derivative volumes totaled 36,236 contracts in July (-1% m/m; +15% y/y), while open interest averaged 116,865 contracts during the month (-4% m/m; +156% y/y).
  
  
• The Baltic Dry Index ended July down 1%, though masking divergent trends as Capesize rates declined while smaller vessel classes ended the month higher. Volatility on average remained muted during July.
  
  
• Looking ahead, Q4 is typically a seasonally strong period for Capesize rates. Brazilian iron ore exports – an important driver of Capesize rates – have been higher in Q4 vs Q3 in all of the past five years. While the impact of Vale’s large-scale S11D project is unlikely to be felt until early 2017, the Capesize forward curve implies a stronger than average seasonal uptick this year following the recent decline in spot rates.

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