If bulk carrier freight markets were a tradeable equity (as indeed they are these days via ETFs) then October could be the month we look back on as being when we switched our collective strategy from Buy to Hold. The BDI began the month at 5,202 points and peaked at 5,650 points on October 7. By October 21, the BDI had retreated to 4,653, down 997 points or 18%. That puts the BDI firmly in what equity analysts would call correction territory.

The capesizes, those doyens of the dilettante investor, stumbled hardest. Having risen from $46,987 to $74,186 during September, the capesize 5TC scaled further peaks in October, topping out at a breathless $86,953 on October 7. These levels haven’t been seen since the 5TC was in short trousers as the 4TC, back in 2009 when China, at that time quite keen on increasing steel output, was hoovering up all available spot supplies of iron ore, the price of which had collapsed following the 2008 credit crunch.

This time, falling iron ore prices will not spur a Chinese buying spree. The news from China was confirmed: no growth in steel production this year, only a 4.9% increase in GDP for Q3, a property market bubble imploding with enough spare housing for 90m people characterized by Evergrande’s liquidity crisis. Energy shortages shuttering manufacturing especially in the north as dwindling coal inventories were corralled for domestic heating.

Understandably, the freight markets drew in their bullish horns. The capesize 5TC fell 41% in two weeks to $51,463 on October 22 with most shipbrokers admitting that charterers still had the whip hand, though many owners were just not offering tonnage to stop what one broker called “the bloodbath”.

Such drama is a feature of the volatile capesize market. In calmer seas, over the same two weeks to October 22, the Baltic’s Handysize 7TC time charter average rose 2% to $37,033, having put on weight since September when it stood at $33,457. This year has been High Summer for handysize owners with quarterly average income rising from $18,484 in Q1 to $21,793 in Q2, $32,227 in Q3 and $36,099 in Q4 to date. Taylor Maritime could not have chosen a better moment for its London IPO than 2021. Judged through the lens of freight income to capital cost, handies trump capes every day this year.

Owners and investors wanting to hedge their bets could either short the FFA market or take time charter cover. According to shipbroker Arrow’s regular panamax report, on October 22 a modern kamsarmax could achieve $34,000 per day on a one-year charter in the Atlantic or $32,500 in the Pacific. The FFA market drops below that level in Q1 2022 with the bidding at around $27,000 for the quarter. That looks like a tradeable differential from here. But will charterers take the bait on physical ships with the market sliding?

Owners fearing the end of this bull market can grasp at this straw: the seasonal pattern in bulk carrier freight markets for the five years to 2020 shows a market rising steadily from Lunar New Year to a peak around China’s National Day in October, then a decline to the next Lunar New Year. The correction we’ve witnessed might only be the usual seasonality. After all, supply growth remains constrained with most analysts expecting no more than 4% growth in the bulker fleet this year. The downside of this view is that it means the market continues sliding all the way to wishing each other Gong Xi Fa Cai on February 1 next year.