Thursday, August 12, 2010

Baltic Index Rally Brings Some Cheer To Bulk Shipping

But Can the Better Times Continue ?
Shipping News Feature

UK – Our piece last month highlighting the parlous state of the Baltic Dry Index, dropping for thirty one straight sessions and bottoming out below 2000 points for the first time for over a year, was understandably a little pessimistic in tone. The Index fell subsequently for the following two sessions ending at a mere 1700 on the 15th July before starting to rally.

In the intervening period we have seen a steady climb in the rate, passing 2000 on the 8th August and today nestling just below 2400. Not the heady days of 2008 of course, two years ago today 7055 was the key number, with, at that time disappointment at a fall from around 11,700 some 3 months previously.

So the $64 million question? Where do we go from here? Obviously all connected with the industry would like to see a steady rise continue, but realistically analysts argue that the current surge is probably unsustainable due in the main to very factors we mentioned in last months article. These are a slowdown of raw materials shipping to China in the face of lower demand for finished goods and a glut of available ships to carry the supply.

On the bright side however is the knowledge that the market is working again, as the ebb and flow of trade continues and as contracts come up for renewal buyers can no longer count on a delay resulting in a more advantageous rate. Overall we can probably look for a fluctuating rate – not the high living of old agreed – but a live moving market with a touch less uncertainty.

As we have argued before the problems in the industry have highlighted the difference between the bulk and container freight sectors, a container line can at least gamble on regaining a better proportion of trade by upping the number of TEU’s to the possible maximum. Bulk contracts operate to a different set of parameters and it must be much harder to hold out for a better deal when so much rides on one agreement as opposed to insisting a single unit container rate is the best one will offer.

Recently the Handy Shipping Guide has received numerous comments from sources all over the globe stating that negotiations with the container carriers for contractors rates are tougher than ever before – understandable considering last years losses – but this is surely a sign that lines are facing the need for austerity in all their dealings. We look forward therefore with hope that the Baltic continues its climb, but don’t be surprised if there are a few slips, if not falls, on the way to a less ambitious summit.