Thursday, July 15, 2010

Baltic Dry Index Down Another 4.5%, Is The Index Not Relevant Anymore?

Here's the closing Baltic Indices numbers.

Baltic Indices

Baltic Dry 1,709
Baltic Capesize 1,653 (-10.11%)
Baltic Panamax 1,980
Baltic Supramax 1,717
Baltic Handysize 958
As of 07/14/10

Baltic Dirty Tanker 791
Baltic Clean Tanker 826 (+1.35%)
As of 07/14/10

Some small sign of relief for the Baltic Dirty Tanker Index but the Baltic Dry Index is absolutely getting hammered.

However, that wasn't too unexpected as highlighted in the posting on Tuesday
Baltic Dry Index Crash: Who Would Be Hurting?

  • “We don’t see anything in the next two to three weeks that’s going to turn the market around,” Guy Campbell, head of dry bulk at Clarkson Plc, the world’s largest shipbroker, said by phone. “Everything is centered on China. We are still watching China in terms of where the steel price is going.”

The longer it drags on, I fear for Greece, after all Greece is a maritime nation and coupled with the debt crisis, the current drastic plunge would probably not be doing the Greek economy any favours at all.

Here's some maritime news.

  • Shipping Index, Once Global Trade Signal, Narrows In On China

    A plunge in an index long seen as a barometer of trade trends is further evidence of waning raw-materials demand from China, but analysts aren't relying on the Baltic Dry Index for clear signals on the strength of the global economy.

    The index, known as the BDI, has lost more than half its value since late May and on Tuesday fell for the 33rd straight day, by 2.7% to 1790.

    The index historically has been seen as a proxy for the volume of international trade in commodities because it measures seaborne freight rates, the cost of shipping bulk goods such as iron ore, coal and grains by sea. It hit the most recent peak of 4209 on May 26. The December 2008 nadir, amid financial panic and cutbacks by companies, was 663.

    While the latest plunge seems to be a flashing alarm about the global economy, analysts say the index no longer paints as broad a picture owing to recent developments within the shipping industry. While the index offers insights into a specific slice of China's economy, its reputation as a broader indicator has been dented by the large increase in the number of ships being built.

    "The BDI shows the impact of demand in a stable demand environment," said Jeremy Penn, chief executive of the Baltic Exchange, which compiles the index. "At the moment, the supply situation is anything but stable."

    Whether or not the global economy enters an extended slowdown depends largely on China, but the nation's own data process is riddled with inconsistencies. So, analysts and economists often look to discern how goods shipments in and out of China influence other parts of the worlds supply chain. The BDI is still useful in this respect.

    The number and size of vessels being booked suggest that the fall in prices to transport seaborne freight and, correspondingly, the BDI, reflects weakening demand, said Melissa Kidd with Lombard Street Research.

    This has been driven primarily by a lack of iron-ore imports by China's steel mills, which are struggling to cope with a tougher export environment, a new pricing system and policy moves to rein in excess construction.

    China imported 47.17 million metric tons of iron ore in June, down 9.1% from May and 15% from a year earlier, according to preliminary data from China's customs authorities. It brought in 309.3 million tons in the first six months of 2010, up 4.1% from a year earlier.

    "Steel production in China is not expected to collapse by any means, but we do expect it will decrease moderately in the short term," said Jeffrey Landsberg, an analyst with Commodore Research.

    Other indicators point to moderation in China's commodity demand rather than a collapse. China's construction sector expanded in May, with new-construction starts doubling from last year. Chinese exports in June were better than expected, even amid the European debt crisis.

    Concerns about having more ships than demand dictates has been an issue for the industry since the credit crunch, which spurred questions about how the record-setting number of vessels ordered when ship owners were flush with cash were going to affect shipping rates in a more-fragile demand environment.

    Ships take about three years to build, historically making supply both easy to predict and relatively inflexible. Moves in the cost of shipping have, therefore, been largely the result of fluctuations in demand for the commodities they carry.

    With uncertainties remaining about how many new ships will now be set afloat, what gave the index its forecasting element has withered. Iron-ore prices for import to China have been falling since April and recently stood at $117.60 a metric ton, the lowest since December, according to data from The Steel Index.

    "The BDI has all sorts of distortions," said Julian Jessop, chief international economist at Capital Economics in London. "At the moment it's been moving in the same direction as other commodity prices. It seems odd to suppose this would be better at predicting the future than commodity markets themselves." ( source:
    here )


Moolah said...

Baltic Indices

Baltic Dry 1,720 (+1.18%)
Baltic Capesize 1,676 (+2.20%)
Baltic Panamax 2,092 (+3.10%)
Baltic Supramax 1,669 (-0.83%)
Baltic Handysize 944 (-0.42%)
As of 07/16/10

Baltic Dirty Tanker 832 (+2.97%)
Baltic Clean Tanker 837 (-0.12%)
As of 07/16/10

Moolah said...

Up 2nd day.

Baltic Indices

Baltic Dry 1,732 (+0.70%)
Baltic Capesize 1,698 (+1.31%)
Baltic Panamax 2,122 (+1.43%)
Baltic Supramax 1,664 (-0.30%)
Baltic Handysize 940 (-0.42%)
As of 07/19/10

Baltic Dirty Tanker 842 (+1.20%)
Baltic Clean Tanker 835 (-0.24%)
As of 07/19/10