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Friday, November 12, 2010

Dry bulk market still on a freefall

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The dry bulk market failed to show any signs of life this week, with the Baltic Dry Index (BDI) still being on the red, now stretching more than 11 straight losing sessions. As of yesterday, the BDI stood at 2,366 points, losing 3.59% from the previous day. All of the various ship segments were on the red, but the main reason for this plunge has been the capesize sector, whose demise doesn’t seem to be over yet. The Capesize Index lost another 4.82% yesterday, thus bringing the whole market down again. As for the Panamax market, which could sail forward on the back of increased coal trade, such a trend has yet to be materialized.
In terms of the Panamax market, shipbroker Fearnley’s noted that it had a slow start to the week, but it is showing signs of a slow firming up in both hemispheres. “The continued Chinese appetite for coal keeps the Pacific strong with Pac rounds fixed in region 22/23k for N.China dely. With the weaker Atlantic market the backhaul rates have increased with approx usd 1000 in one week. In the Atlantic we also see more coal and grain cargoes for end Nov/early Dec dates - however number of available ships outnumbers the cargos for now and Tarvs are fixed in the 16/17k region while its rumored one fhaul at 30k+. The period market has been slow with little reported, but the interest is back for same” said the broker’s latest weekly report.

As for the Capesize market, it described its condition as slowly but steadidly softening, as demand just about fails to match supply on the main routes. “With Brazilian miners absent from spot market since some time, ballasters from F.East struggle to maintain levels on the Tubarao/China trade. The N.Atlantic market, however, seems to live a life partly of its own as early Cont/Med tonnage is tight. Australian miners are busy picking prompt ships for the W.Austr/China trade - levels nevertheless softening gently and average earnings for Pacific rounds coming in at usd 34.5k, down some 10% w-o-w. Period activity low as paper have failed to give support, and limited to short duration only - notable fixtures including 18k dwt/built 2010 done for 4-6 months at usd 37750 basis prompt delivery in China, also 176k dwt/ built 2010 for 4-6 months at usd 36k basis prompt delivery in S.Korea” said Fearnley’s.
Meanwhile, in its third quarter report issued this week, Knightsbridge Tankers commented on the dry bulk market, by saying that in spite of a net fleet growth of 11.8 percent (55.8 million dwt) the dry bulk segment has again surprised on the upside. Iron ore transport to China, which has been the fastest growing sea borne trade the last decade has even experienced a small decline the three first quarters this year compared to 2009. The combination of these two factors should cater for a lower utilization of the dry bulk fleet.
“However, other areas have contributed positively and overall demand has been able to absorb the vast number of newbuildings so far. We would like to emphasize three reasons, A) Strong increase in coal imports to China and India, B) Congestions and C) Chinese coastal trade. The Capesize spot market has experienced a lot of volatility during third quarter. Average earnings have been $26,233 per day, with a low of $12,000 per day mid July and a high of $ 41,000 per day early September. Asset values have softened slightly during the quarter. By the end of September 2010 the value of a five year old Capesize was $55.4 million compared to $60.4 million by the end of the previous quarter. Long term time charters are still holding up, one year time charter period is estimated to generate $30.000 per day for modern tonnage while five year time charter stands at approximately $27,500 per day” concluded the ship owner.