Thursday, November 06, 2008
Baltic Up for the First time in Months!
It's true, the Baltic Dry Index rose for the first time in months
Thursday, 06 November 2008
Yesterday (Wednesday) marked the first time from September that the suffering Baltic Dry Index (BDI), an index that tracks commodity freights for the shipping industry managed to scrape a narrow rise by 11 points at 826, with the Panamax index leading the pack of an otherwise losing market. It rose by 93 points, following another rise posted on Tuesday, which could be an indication of life for the dry bulk market. Nevertheless, all other indexes kept their downward trends, with the capesize index moving further down by 26 points at a total of 1,185 points. If the decline had continued at the pace set during the previous weeks, the BDI was on track to hit an all-time low in less than a fortnight, beating the record of 554 points set twenty years ago.
Fearnley’s latest report released yesterday left little room for optimism though, but it tracks what happened in the market until the beginning of this week. The broker stated that there is “still no light at the end of the tunnel”. Commenting on the capesize sector which is deemed as the benchmark for the sector, Fearnley’s said that even though Vale has withdrawn their demand for a price increase the financial markets are still not working. “This has caused a total lack of activity with contracted cargoes being washed out rather than performed. As the numbers of spot vessels are increasing and as indexes continue to fall, faith in a recovery has all but disappeared. A few 12 month period fixtures have been concluded, but these seem only to form part of a fleet renewal process rather than a belief in a market recovery. This week the market seems more interested in what happens with the FFA settlement and the potential fall out related to this” the broker said.
Earlier on Barry Rogliano Salles had stated that widespread reports of production cuts by Chinese steel mills were finally followed this week by the first major pullback in ore production. Vale will reduce its output by 10% in response to what it calculates as
a 20% reduction in worldwide steel output. Ore stockpiles meanwhile remain high in China, with totals actually rising a fraction over the last seven days.
But what’s more important at this point is that ship owners are being squeezed on all sides with rising insurance costs, loss-making bunker hedges and the falling creditworthiness of charter partners adding to their rate woes.
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