Slow recovery likely for freight derivatives amid low market rates

An overabundance of dry-bulk vessels ordered before the financial crisis now coming on line is weighing on the freight market and freight rates. Alex Davis looks at how freight derivatives demand will cope during what many expect will be a sustained period of low price volatility

Since those heady days in June 2008 that saw the capesize vessel category freight rates hit an astonishing $233,988 a day, freight market prices have fallen a long, long way. By the end of 2008, capesize rates were less than $2,500 a day. Although there have been periods of recovery, rates never threatened to climb back to those unprecedented levels and only in the last month, capesize rates hovered around the $5,000 a day mark.

The situation became so severe that the Baltic Exchange recorded