Monday, March 30, 2009
Dry bulk market still on the losing side
Monday, 30 March 2009
The dry bulk market seems to have lost its momentum during March, as evidenced by the fall from the highs of almost 2,300 points (the best level from the fall of 2008), to just 1,687 points last Friday. During the previous week, the Baltic Dry Index lost another 100 points and more, or a little less than 6% week on week. The main sectors affected were the capesizes and the smaller supramaxes, with the BCI (Baltic Capesize Index) losing more than 100 points or just under 5% on the week, while the BSI (Baltic Supramax Index) shed more than 200 points of just over 13% from the previous week.
What’s even more alarming at least for the short-term prospects of the market, is the fact that during the previous week, the global stock markets managed to gain ground. The only index of the shipping market that managed to edge off the downward pressures and end the week in a marginal rise of 1% was the Panamax Index, which though had led the fall in previous weeks.
Meanwhile, experts remained puzzled as to estimate the future course of the market. One voice mention hearing was the one of the head of Chinese shipping giant Cosco Group, Wei Jiafu, who said last week that the dry bulk market will recover by the second half of 2009.
In the sale and purchase markets, things are quite different. The fall of the freight market has depressed ship values, with increasingly more owners been prone to purchase vessels at quite attractive prices, compared to the previous months. As a result, purchase enquiries are abundant and most of them are for older tonnage, which poses less risks at these prices, given that it can always head for demolition leaving hefty profits to ship owners.
As we highlighted in previous top stories, the “war” that has broken out between the Bangladesh Environmental Lawyers Association (BELA) and the Bangladesh Ship Breakers Association (BSBA) may prove to be a serious issue, which may bring disruption to the recycling industry in Bangladesh. According to Weberseas’ latest weekly report “BELA came out with a court ruling last week ordering ship recycling yards that have not obtained environmental clearance to shut down within 2 weeks. This meant that all 36 such yards would need to shut down as none of them hold such clearances as these were not legal requirements in the past. BSBA have reacted and we understand that they have a 3 week period to appeal and industry experts believe a solution will be found. This, however, is an environmental issue that has to be addressed and may be a re-occurring problem”.
That said, ship demolition prices have remained stable, with the highest ones found in Bangladesh, followed by India, Pakistan and China. Weberseas said that the “demo sale of the week is that of the caper DURI (20,000 ldt) sold for what seems to be a very high price of US$ 335 per ldt and heading for Bangladesh. This competes with the prices that are being paid for tankers. We hope that the high prices paid of late in Bangladesh will not be challenged by buyers/end users taking advantage of the instability and uncertainty in the Bangladeshi re-cycling industry” said the broker.
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