Tuesday, July 20, 2010

Oversupply Of Vessel Weighs Heavy On The Baltic Dry Shippers

I reckon I better make this posting since I had continuously highlighted drop of the Baltic Dry Index since it fell from a high of 4209 recorded on 26th May.

The Index had recovered slightly since hitting the low of 1709.

Here's the data of the Baltic Indices as at 19th July 2010. (Yes, the BDI is now up 2 days in a row. :D )

Baltic Indices

Baltic Dry 1,732
Baltic Capesize 1,698
Baltic Panamax 2,122
Baltic Supramax 1,664
Baltic Handysize 940
As of 07/19/10

Baltic Dirty Tanker 842
Baltic Clean Tanker 835
As of 07/19/10

Here's some research comments from Korean Shipping messenger.

  • BDI losing streak ends

    The Baltic Dry Index gained 1.2% in London Friday, breaking a losing streak which stretches back 35 consecutive trading days to May.

    Still, with capesize vessels earning less than $13,000 daily, the fall has hit shipowners hard in the pocket and dented sentiment in the market.

    Daniel Brebner, an analyst at Deutsche Bank, said: “We interpret the recent weakness in the Baltic Index as reflecting the early stages of a slowdown in Chinese steel demand.

    “A slowdown in orders for steel products has resulted in a slowdown in orders for iron ore over the past month, resulting in a decline in shipping,” he said, according to Bloomberg.

    Friday’s uptick ends the worst losing streak for the BDI since November 2005, when it fell for 48 successive days.

    Shipowners including Sammy Ofer have anchored vessels after refusing to accept loss-making charters.

    Jeffrey Landsberg of Commodore Research, said earlier this week: “
    The recent decrease in congestion combined with the continued delivery of a large amount of newbuildings is largely responsible for freight rates coming under recent pressure.”

    According to Oppenheimer analyst Scott Burk around
    100 capesize newbuildings have been delivered in the first half of 2010, compared with only 34 a year ago.

    A further 206 capes are expected in the remainder of this year and 282 more are slated to arrive in 2011.

    In a note to clients Burk added: “
    Additionally, the lack of scrapping activity has continued to exacerbate the vessel oversupply concerns.

    “There have been no capesize demolitions since May 2009 as owners continue to operate old vessels because of rates above break-even costs.”

    Burk says the US grain season in September and possible Chinese iron ore import increases in the fourth quarter of 2010 following a re-pricing of contracted ore could push rates higher.

And ....

  • Analyst thinks drybulk shipping market bottomed

    A Deutsche Bank analyst says he thinks the drybulk shipping market may have bottomed, a sign that global trade might soon improve.

    THE OPINION: The Baltic Dry Index, which measures activity on major shipping lanes throughout the world, posted its first gain Friday in nearly two months. The index is a key measure of global trade because it indicates how well shipments of everything from coal to cement are moving. The gain was the first gain since May 26.

    Analyst Justin Yagerman said in a client note Friday that rates for Capesize and Panamax vessels, two kinds of drybulk ships tied heavily to coal and iron ore trade, are up "considerably" -- both of them fetching rates more than twice their operating costs. Coal and iron ore are used in steelmaking. Coal is also used to generate electricity.

    Capesize vessels are named because they are too big to fit through the Panama or Suez Canal and must instead navigate around the Cape of Good Hope or Cape Horn to travel between oceans. Panamax vessels are the largest ships that can fit through the locks of the Panama Canal.

    THE STOCKS: Some drybulk shipping stocks gained Friday despite a lower broader market. Diana Shipping Inc. gained 27 cents, or 2.1 percent, to $13.37. Genco Shipping & Trading Ltd. was up 25 cents, or 1.6 percent, at $16.38

Source: here


Moolah said...

21st July 2010

Ambrose Evans-Pritchard : Double dip in the Baltic