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Thursday, August 13, 2009

Dry bulk market facing the doldrums

Wednesday, 12 August 2009

An increasing number of shipping industry experts are looking into the pace of demolition activity, as a tool which will essentially shape – among others of course - the balance between supply and demand in the following months. The Baltic Dry Index lost another 2.45% yesterday to 2,623 points, which is the lowest level for almost three months. It has retreated by nearly 39% from its highest level in the beginning of June, when it had reached 4,291 points. While July’s iron ore imports from China were significantly higher (47%) from the relevant month of the previous year, the Chinese have completed their re-stocking as BHP noted last week.
This means that August, traditionally a slow month for the shipping industry, isn’t expected to change much, regarding the plunging course set thus far.
But, a ray of hope can be found in the tension between China and Australia, after the Rio Tinto “spy” case and the inability of the two parties to reach a deal on the contract prices of iron ore. As a result, Chinese steel mills are increasingly looking towards Brazil’s iron ore. Should cargo demand increases for that route, many ship owners will be particularly pleased, since it offers greater profit margins.
According to Barry Rogliano Salles’ latest weekly report on the dry bulk market, “much now depends on China’s appetite for ore and the pace of deliveries going forward. Although bulk scrapping continues steadily, it is still falling way short of prospective deliveries. So far approximately 240 bulkers of 10m deadweight have been demolished since January, mainly Supramaxes and Handysizes (about 4.5m deadweight) and Panamaxes (about 2.5m deadweight). However with a theoretical 50m deadweight of new tonnage due for delivery over the remainder of the year, it will only make a small dent in supply” said the broker, highlighting the need for scrapping as much tonnage as possible.
Hellenic shipping companies have scrapped 10 ships of various types from the beginning of August according to Clarksons data. Just two of them were dry bulk carriers, belonging to Fairport Shipping which sold “Volissos Power” in scrapyards in Bangladesh and Pentulum Shipping which scrapped “Golden Key”. Other scrapings included two tankers, three multipurpose ships, as well as two reefers and one container ship from Costamare.