Baltic Dry Index Plunges As Warned!

Previously: Could This Be The Start Of The New Leg Down For BDI?

That posting was posted on 28th Jan 2009, Baltic Dry Index then was at 3118.

Here's how the Index has been doing since then.

Time to bring out the goats again from the farm and start gloating eh?

As highlighted in the earlier posting Could This Be The Start Of The New Leg Down For BDI?

• The industry expects further weakening with the approaching Chinese New Year
• K S Nair, director of Shipping Corporation of India said, “There will be no trade to China now, and unless economies like the US and Europe open up to see more exports out of China, there will be a lull.”Besides, monetary tightening in China may also curb demand for more imports.
• Meanwhile, a slew of new ship deliveries in the next two to three years also loom hard on any expected revival in the shipping market and till economies like the US and Europe open up, shippers will face the heat of volatility.

The 'slew of new ship deliveries in the next two to three years' is rather interesting because as mentioned before this could "potentially equate to supply of ships more than the demand for the shipping."

Here's an article published on 25th Jan The Baltic Dry Index Is About To Be Crushed Once Again

• FTAlphaville highlights that broker Icap expects 1,400 vessels to be delivered in 2010, which equates to 120 vessels per month on average. (Even if in reality they won't be spread out evenly) How bad is 120 ships per month relative to what the market has had to deal with so far?
  
  At no point during 2009 did the rate of delivery exceed 60 vessels in one month – but even if this rate of delivery were maintained throughout 2010 it would still equate to slippage of around 50 per cent. However, in light of the sheer size of the orderbook, and despite high levels of slippage, the market still faces the prospect of continued tonnage growth.
  
  This doesn't mean every dry bulk company is toast, but it does mean that the Baltic Dry Index's strength can't be sustained forever, especially with China beginning to tighten its monetary policy and restrict economic growth. (China, as half of global steel demand, is the major driver for bulk shipping rates).
  
  If a shipping stock makes sense after plugging-in half the rates it earns today, then it could be a decent value, but if it requires current rates to be sustained then it's a highly speculative bet going forward, where the odds are stacked against you.

120 new vessels is a lot, yes? One has also to consider the number of existing vessels too. And from the same article, the following chart of dry bulk carriers orderbook is another worry.