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Friday, August 07, 2009

Baltic Dry Index reaches lowest level in two months, under 3,000 points

Friday, 07 August 2009

Amid a traditionally sluggish August for the dry bulk market and reports that China’s restocking of iron ore has been completed, the Baltic Dry Index has been steadily on the down side during the past few days. Yesterday, the BDI ended the session down by 144 points to below 3,000 points at 2,907. It’s the lowest level observed in two months and prospects for dry bulk ship owners remain dim, since even if market activity picks up, the freight market is predicted to face further pressure from the rising tide of new building deliveries, which for the most part of the first half of the year haven’t affected the balance of supply and demand.
Still, larger ship types like the capesizes have been suffering the most in recent days. The Baltic Capesize Index retreated further yesterday (-217 points) to end at 4,631 points, which is translated to an average daily charter of $48,000. Losses occurred in other major ship types as well, with the Panamax Index shedding 165 points to reach 2,754 points or $22,114 for an average daily charter rate. As a result, both the Supramax and the Handysize market retreated as well.
According to Fearnley’s latest weekly report, capesize rates have been steadily falling for one straight week and “charters are now rating West Australia - Prc round USD 12.50 pmt compared to USD 14.50 being fixed at the top last week. More ballasters building up out of the Pacific and lack of fresh inquiries out of Brazil resulting in owners now rating usd 34.50 for early September stems Tubarao/Qingdao, but charters are playing their game, not in a hurry to cover. They seem confident market will continue to slide, supported by the number vessels that will be open in Brazil during August. There have been rumours in the market Vale has been selling cargoes to Chinese steel mills for September, but this has not been confirmed. All in all a great degree of uncertainty is describing the market right now” said the shipbroker.
If one tries to find a silver lining in the current status of the market, he could say that it could prompt a new wave of dry bulk carriers scrap deals, as has been the case thus far this year. Everytime the BDI is falling, activity in the demolition market has been picking up and vice versa. But with scrapyards in the India subcontinent reportedly working close to 80-90% of their capacity and with ship queues lengthening, it’s dubious whether a significant number of deals can be concluded shortly.