Dry bulk equities (aggregate seven stocks under our coverage) posted 21% negative returns during the full year 2020. However, since the beginning of 2021, these stocks have registered a gain of 15.7% so far (as of 12 January 2021). Going forward, the stocks are expected to consolidate because the post-COVID-19 economic recovery in China has boosted the prices of many commodities from their lows in 2Q20.

One of the biggest drivers of this recovery has been rally in iron ore prices on the back of the Chinese stimulus package, which weighted heavily on the manufacturing sector. Iron ore futures have been popular among some investors as a proxy for directional bets on the Chinese recovery, which led to growth in prices. This along with several issues tightened the physical supply of the metal.

However, the recent surge of 11% in the Baltic Dry Index on 8 January 2021 is attributed to coal as much as to iron ore. Cold weather in China has boosted demand for power across Chinese grids, in turn, increasing demand for coal.

Talking about the futures market, iron ore can be represented by the iron ore fines 62% Fe CFR Futures traded on the Singapore commodity exchange, and coal can be represented by the Rotterdam coal futures. Both have been faring better than they were a year ago. Iron ore gained consistently throughout the year before skyrocketing in November and December. Meanwhile, coal futures had a rocky year, gaining ground only recently.