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Wednesday, May 27, 2009

Optimism returns in the dry bulk market

Wednesday, 27 May 2009

After several months of dim prospects, which of course haven’t faded (rather the opposite), at least the recent and continuous rallyof the Baltic Dry Index has been enough to allow room for more optimism in the market. With the capesize sector leading the pack, yesterday the BDI managed to post its 18th consecutive rise, to end the session at 2,942 points , while the Capesize Index (BCI) gained an impressive 454 points at 4,797 points. This has brought average time charter equivalent rates up by $5,476 to a total of $50,481, since the sector also gained a further 25% during the course of the previous week. The market has not been at this level since last September. In the period market, several forward fixtures of varying periods were signed on newbuildings at midtwenties levels, depending on vessel type and delivery date.
The news of the day was the deal reached between Australian miner Rio Tinto and Japanese steel Nippon Group, for a price reduction for term iron ore annual contract ranging from 33% up to 44%. Still, as Barry Rogliano Salles (BRS) noted in its latest annual report, frenetic stockpiling in China continues to chase up the market, with Chinese mills apparently anticipating a rise in domestic steel prices later in the year.
BRS also reflected the current trends in terms of dry bulk tonnage supply. “Delays in newbuilding deliveries are also propping up the market: some 200-plus Capes are contractually due for delivery this year, excluding recent cancellations. However, after nearly five months of the year we have seen just 30 Capes handed over, equal to around 5m deadweight. (Around one-fifth of this total was itself delayed from 2008.)
With cancellations slowing and shipowners unable to defer deliveries indefinitely, the theoretical orderbook for 2009-2012 delivery remains around 40m deadweight per year. In short, this suggests shipowners and shippers would be wise to proceed cautiously, despite the fact Cape rates have now returned to 2005/2006 averages” said BRS.
In the panama front, there were still lots of vessels open end May and early June, but owners are not in a hurry to fix out and most are still asking US$16,500/17,000/day for a round voyage. There is still a good supply of coal cargos, mostly from ec Australia but also from Indonesia, NOPAC and South Africa, and it is possible for even prompt vessels to pick up business for the ballast leg. “Charterers are monitoring the market and are reluctant to overpay due to the number of potential candidates, accepting a contract once they approach the deadline for nomination. Some vessels were reported fixed but failed, noted BRS.