Just posted on Forbes. Rough Seas For Dry Bulk Shippers
- Falling commodity prices and grim economic data are reviving dry bulk shipping investors worst fears: that the global recession is far from over and demand will continue to slump.
On Wednesday commodity prices and stocks tumbled as investor fears over the ailing economy rippled through the financial markets. (See "Wall Street's '09 Gains Gone.") There may be a silver lining on this dark cloud: freight rates on dry-bulk ships are beginning to inch higher. Nonetheless, the Baltic Dry Index, which is managed by the Baltic Exchange in London and measures dry bulk shipping rates on 40 routes across the world, is still down over 90.0% since its summer highs over 11,000. On Wednesday the index rose 1.8%, to 789.
"It's not like the demand is going through the roof," said Lazard Capital Markets analyst Urs Dur. "Hopefully if this keeps up it's a sign that the credit markets are easing. The normalization of trade has gone up in baby steps over the past two days, but I wouldn't read too much into this."
Meanwhile, rates on Capesize ships, which are the largest vessels, have been steadying following a recent plunge, as steel prices rise and iron ore inventories in China continue to fall. Dur said that he saw 25 charters announced on Wednesday, 17 Tuesday, and 10 on Monday, which is an improvement though it's still down from the 35 to 50 charters a day he saw when the market was good. Nonetheless, the sector is still facing the challenge of oversupply of ships.
The two-day rally in the Baltic Dry Index pushed dry-bulk stocks higher since Monday, but Wednesday saw profit-taking as investors tried to make up for some of the losses they suffered after equities began plunging over the summer.
Posted on Monday on Star Business, Dry bulk market shows signs of recovery
- Monday January 5, 2009
Dry bulk market shows signs of recovery
THE dry bulk market slump is expected to continue into this quarter due to the uncertainties in demand of iron ore transportation although it has shown slight signs of revival in mid-December.
Last year, the Baltic Dry Index (BDI), the barometer of shipping cost for commodities, fell 93.4% from its peak of 11,793 points on May 20 to 774 points on Dec 24.
From its lowest point of 663 points on Dec 5, the BDI had shown marginal increase of 26.1% to 836 points on Dec 17.
This was then supported by the sentiment of iron ore demand. China, the world’s biggest steelmaker, imported 32.5 million tonnes of iron ore in November, up 6.2% from October.
Some experts predicted that the dry bulk rates were likely to recover this year when China replenished its dwindling iron-ore inventory and demand for thermal coal started to pick up.
According to TA Securities’ latest Malaysian Bulk Carriers Bhd (Maybulk) update, China’s iron ore inventory was still stalling at around 70 million tonnes while steel production and iron ore imports were in a downward trend.
Maybulk is the biggest dry bulk shipping company in the country.
“It is reported that Chinese steel companies are seeking to change the commencement of the iron ore term contract for this year, as prices of the steel-making raw materials dropped sharply in recent months,” said the report.
China would usually conduct price negotiations with the top three iron ore producers – BHP, Vale and Rio Tinto – in April every year.
The report said if the negotiation was successful, it would give short-term positive sentiment that would help revive the collapsed dry bulk freight market as steel mills could buy raw materials at more favourable prices.
“This will in turn benefit the dry bulk shipping companies such as Maybulk,” it said.
Meanwhile, the report said the International Energy Agency (IEA), in its latest monthly report, indicated that China’s exports were expected to slow down as its main export markets in Europe and the US were expected to slow sharply this year.
“Nonetheless, we believe the stimulus plan of 4 trillion renminbi announced by the Chinese government to revive the economic growth might cushion the poor condition in the long run,” it said.
Recovery in this sector? Yes.
However, before one gets carried away, let's consider the following chart of the BDi from 2000 to 2003.
We are now at 821.
Compare to where the index was from 2000 to 2003.
How do you now feel about the index being at 821?
Yes, the baltic dry index has recovered from below 700 but that's probably all what one can say about the index currently, yes?
So if one says 'recovery yes, profitability no', would you dare argue against such statement?
Other baltic postings made: http://whereiszemoola.blogspot.com/search?q=bdi
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