10-Q: Amplify Commodity Trust Reports Q2 Results: BDRY Navigates Rate Declines, BWET Faces Volatility

Amplify Commodity Trust's Q2 report reveals BDRY's challenges amid declining dry bulk spot rates and BWET's exposure to crude tanker market volatility.

Summary

• Amplify Commodity Trust's Q2 report covers the performance of two series: Breakwave Dry Bulk Shipping ETF (BDRY) and Breakwave Tanker Shipping ETF (BWET).
• BDRY experienced a decline in dry bulk spot rates, with the Baltic Dry Index losing over 50% of its value during the quarter ending December 31, 2024.
• Geopolitical factors, including the Israel-Hamas conflict and Red Sea ship attacks, continued to impact shipping routes.
• Iron ore trade volumes to China decreased, affecting demand for dry bulk transportation.
• BWET faced low volatility in crude tanker spot rates, with VLCC rates declining compared to the previous year.
• Slower oil import growth and weaker domestic demand in China remained concerns for tanker rates.
• The crude tanker orderbook remained historically low, but has been steadily increasing from the record low levels of summer 2023.
• BDRY's net asset value (NAV) per share decreased by 43.64% to $6.04, while BWET's NAV per share decreased by 33.46% to $9.88 for the three months ended December 31, 2024.
• For the six months ended December 31, 2024, BDRY's NAV per share decreased by 50.19% to $6.04, and BWET's NAV per share decreased by 40.79% to $9.88.
• Amplify Investments LLC took over as the sponsor of the Trust on February 15, 2024.
• On November 5, 2024, Cohen & Company, Ltd. was appointed as the Trust's independent registered public accounting firm, replacing WithumSmith+Brown PC.

Sentiment

Score: 4

Explanation: The report highlights negative performance for both BDRY and BWET due to declining rates and market volatility, resulting in a negative sentiment score.

Positives

• The crude tanker orderbook for the next few years remains historically low, which could aid the overall projected market balance.
• The recent announcement by OPEC+ to gradually increase oil production sometime in 2025, should, if implemented, increase demand for crude tankers.
• The per Share market value of BDRY and its NAV tracked closely for the three and six months ended December 31, 2024 and 2023.
• The per Share market value of BWET and its NAV tracked closely for the three and six months ended December 31, 2024 and 2023.

Negatives

• BDRY experienced a significant decline in dry bulk spot rates, with the Baltic Dry Index losing over 50% of its value during the quarter.
• Iron ore trade volumes to China experienced a decline versus the previous year, negatively impacting demand for iron ore.
• VLCC rates ended the year at the lowest point in three years, indicating weakness in the crude tanker market.
• Slower oil import growth and weaker domestic demand in China remain major concerns for tanker rates.
• BDRY's NAV per share decreased by 43.64% to $6.04 for the three months ended December 31, 2024.
• BWET's NAV per share decreased by 33.46% to $9.88 for the three months ended December 31, 2024.
• For the six months ended December 31, 2024, BDRY's NAV per share decreased by 50.19% to $6.04, and BWET's NAV per share decreased by 40.79% to $9.88.

Risks

• Geopolitical turmoil, including the Israel-Hamas conflict and Red Sea ship attacks, continues to affect shipping routes and could lead to significant disruptions.
• The Chinese real estate sector remains in a relatively fragile state, impacting steel demand and iron ore prices.
• The conflict between Russia and Ukraine poses an increasing risk for global economic growth and could negatively affect demand for dry bulk transportation.
• Natural disasters and widespread diseases, including pandemics, can be highly disruptive to economies and markets.
• Regulatory changes in the futures markets could alter the nature of an investment in the Funds or their ability to implement investment strategies.

Future Outlook

The report mentions that the dry bulk orderbook continues to increase from relatively low levels and that OPEC+ may increase oil production sometime in 2025, which could increase demand for crude tankers.

Industry Context

The report provides context on the dry bulk and tanker shipping industries, including factors such as geopolitical events, trade volumes, and economic conditions in China.

Comparison to Industry Standards

• BDRY is the only Freight futures ETF globally, making direct comparisons difficult.
• BWET competes with other commodity ETFs and investment vehicles that provide exposure to the crude oil tanker market, but the report does not provide specific comparisons to these competitors.

Stakeholder Impact

• Shareholders of BDRY and BWET experienced losses in their investments due to the decline in NAV per share.
• The performance of the Funds is affected by factors such as geopolitical events, trade volumes, and economic conditions, which impact the broader shipping industry.

Key Dates