Wednesday, January 05, 2011

Baltic Dry Index Plunges 4.5%

Blogged on the 23 Dec: The Baltic Dry Index (BDI) Is Not Too Happening

On Bloomberg:

  • Freight costs fell as Queensland’s worst flooding for 50 years prompted buyers of the Australian state’s coal to cancel ship charters, intensifying competition for cargoes as the extra vessels become available.

    Flooding has covered an area the size of France and Germany, damaging crops and cutting coal stockpiles for export as mines shut. Freight rates as measured by the Baltic Dry Index today slumped 4.5 percent to 1,693 points, taking the decline since Sept. 10 to 43 percent.

    “There’s no doubt it’s going to be bearish,” said Stuart Rae, joint managing director of M2M Management Ltd., a London- based hedge-fund group that operates about 65 commodity transporters and trades freight derivatives. “It’s going to exacerbate a market that was already squirming.”

    Queensland exports about 180 million metric tons of coal a year, or about a fifth of the global total, according to Sverre Bjorn Svenning, an analyst at Fearnley Consultants A/S in Oslo. The dry-bulk fleet expanded by 17 percent last year, outpacing an 11 percent increase in haulage demand, according to the research unit of Clarkson Plc, the world’s biggest shipbroker.

    $18,697 a Day

    So-called capesize vessels, the largest tracked by the Baltic Exchange, led declines today as daily rental rates slid 6.6 percent to $18,697. Costs fell 2.7 percent to $14,312 for panamaxes, lost 4.8 percent to $14,860 for supramaxes, and declined 2.9 percent to $11,805 for handysizes.

    Total seaborne trade in dry-bulk cargoes, spanning commodities including coal, iron ore and grains, totaled 3.3 billion tons last year, London-based Clarkson estimates.
    Queensland coal buyers already invoked force majeure, a legal clause giving them the right to cancel charters, according to Rae. The release of ships from charters will increase competition among owners for cargoes, he said.

    Producers of power-station coal in Indonesia and South Africa are unlikely to have time to increase their output, potentially generating alternative vessel demand, because the Queensland disruption probably will be too short, according to Svenning at Fearnley.

    “The coming four to six weeks are crucial,” he said. “I don’t think this is positive at all.”

    There are 66 dry-bulk commodity carriers now located at Dalrymple Bay and Hay Point, coal-loading facilities about 490 miles north of Brisbane, according to ship-tracking data compiled by Bloomberg.

    A capesize ship can haul more than 110,000 deadweight tons, according to Drewry Shipping Consultants Ltd. in London. By that definition, 31 of the vessels at Hay Point and Dalrymple Bay would be capesizes.

    Today’s freight-rate assessments were the first published by the Baltic Exchange since Dec. 24. The Baltic Dry Index slid 41 percent last year after almost quadrupling in 2009.