Baltic Dry Index on the rise again

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Wednesday, 06 May 2009

Volatility is the key word for the trials and tribulations of the Baltic Dry Index and consequently all ship owners involved in the dry bulk trade. The BDI, a gauge that reflects the cost to haul iron ore, coal, grains and other raw materials via ships, edged up higher yesterday to reach 1,897 points, gaining 91 points from the previous session. It had gained a further 1.1 percent or 20 points last Friday, before a break on Monday. Leading analysts keep pointing out that the course of the BDI should be closely monitored as an indication of the world economy’s rebound. But the fact remains that even if this well-sought rebound arrives, whether that will be at the end of the year, or at the first months of 2010, the BDI could still be plagued by another crucial factor. That is of course the potential oversupply of bulk carriers, which is expected to hinder the freight market’s possible rally back at healthier levels and definitely more sustainable for most ship owners.
For the moment, the index remains at very low levels. That said, the main winners from yesterday’s upward swing, were the bigger vessel types, with the Capesize Index reaching 2,528 points (up by 152) and the Panamax Index standing at 1,702 (up by 146). Despite this, earnings for panamaxes remain below the smaller Supramaxes. A panamax can average $13,658 on a daily time-charter rate, while a supramax can reach up to $14,952 on average. The relevant daily average rate for a capesize, once the “golden goose” of the market, now stands at $23,744, almost a tenth of the earnings it could fetch almost a year ago.
'Steady steel prices have supported rates' for capesizes, Omar Nokta, an analyst at Dahlman Rose & Co in New York, wrote in a note on Friday. 'The panamax market has benefited from a surge in activity levels during the past few days and rates continue gaining.' Iron ore is the biggest single dry-bulk cargo hauled at sea, accounting for an estimated 26 per cent of the total this quarter, according to Drewry Shipping Consultants in London. Capesize forward freight agreements this quarter, used to bet on future shipping rates, dropped 5 per cent to US$20,925 a day in Oslo. Panamax FFAs slid 4.1 per cent to US$11,875 a day. The data are from broker Imarex NOS.