The Baltic Dry Index (BDI) added one point on
Monday to finish at 922 points, advancing its recent tilt higher. After some
weakness at the end of September, the BDI turned higher mid-week last week.
Pushing the BDI higher is the return of China to the markets, following their
week-long National Day holiday.
The National Day holiday from Oct. 1-7 in
China impacted shipping demand, but as that holiday wrapped up and shipping
activity improved, and the BDI pulled higher. Looking forward, optimism remains
over the demand to ship raw materials, and according to one broker, the
capesize market is looking good for the next four-six weeks. While demand to
ship iron ore remains robust, there is also optimism about the demand to ship
other mined goods.
The BDI has improved significantly since the
first-quarter of 2016, with the hire rates for all bulk carriers seeing
significant improvements, but the market still face some challenges, namely the
oversupply of vessels. Even though demand has picked up, an oversupply of ships
means that average industry freight earnings are still around loss-making
levels. For the BDI to see a significant improvement in value, ship scrapping
rates have to pick up to balance the supply side of the equation. At 922
points, although the BDI has more than tripled since hitting its record low
last February, it is still off its record high of above 11,000 points.
In the third quarter, solid demand to
transport grains and raw materials pushed the BDI higher, and through the fall
continued demand to transport raw materials for restocking ahead of winter
should continue to support increased hire rates ahead of the winter lull. The
BDI typically sees its annual price peak in the fourth quarter of the year.
Source:
economic
calendar. 10 October 2016
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