Tuesday, November 30, 2010

Bulk Shipping Index Sinks As Dry Freight Charter Prices Fall

Baltic Dry Continues Downward Trend
Shipping News Feature

UK – WORLDWIDE – The further purchase of new ships by the major ore carriers in the light of increased estimates of future steel production is largely to blame for the continuing descent of the Baltic Dry Index which fell again this week, according to most industry observers. Six weeks ago we tentatively suggested that rates would probably stabilise in the short term. That proved accurate, as long as you viewed short term as meaning around ten days, any longer and our analysis goes into the bin alongside many more.

The Index has declined in three consecutive sessions and stands down 14% as against three weeks ago closing yesterday at 2145. As usual this makes little sense to those who are unused to the vagaries of the Index, all the predictions are for increased steel productivity for the foreseeable future but a closer look reveals that it is Capesize vessels, the main carriers of ore, which have seen a sharp decline in the daily charter rate.

Many companies have firmed up short and medium term charter contracts for their fleets and there now appears to be more spare capacity with increased competition to hire out the giant vessels available, depressing the daily price.

In the short term then we are seeing the Index down at a level not reached since August with much wringing of hands and gnashing of teeth amongst the brokers. Taking a more balanced view however this time two years ago one saw a market trading in the 660’s and ship owners eyeing window ledges speculatively. The market may be oversupplied with Capesize ships but in the longer run there is the hope that the anticipated increases in the supply of ore and the demand for finished product will drive this key market indicator on to higher things.