The dry bulk market’s benchmark index, the Baltic Dry Index (BDI) lost further ground in the beginning of the week, following the trend of the past week, which marked one of the fastest tumbling ones for freight rates in a long time. Yesterday, the BDI lost 1.58% to end the session down to 1,495 points, the lowest in almost two years.
Once again, the capesize sector didn’t manage to find any support, thus ending down by 4.13% and widening the gap with the smaller – sizewise – panamax market, which was up by 1.45%. As a result, the BDI has now fallen by almost 32% since early December when it first began this downturn.
According to a Reuters quote from consultancy firm Commodore Research’s managing director Jeffrey Landsberg, “a solid amount of Chinese iron ore fixtures have come to the market, the vast majority for capesize vessels. Capes are under great pressure, however, due to a large amount of available vessels. 'Simply put, the capesize fleet has become very large” he said. With Capesize rates now perilously close to the $10,000 mark, it’s more than obvious that owners must reconsider their ship demolition strategies. This applies especially to ship owners who have both modern and older dry bulk vessels, as the current market conditions, simply mean that some owners’ fleets are “canibalizing” each other. In other word, an owner’s older vessels are damaging his newer vessels by oversupplying the market and dampening rates.
So, what’s the situation in the demolition market? According to the latest report from Golden Destiny, “prices are hot not only in Indian sub-continent but also in China China for a capesize of 208,739 dwt built 1982 for $480/ldt, a remarkable firm price for China
It is noteworthy that the scrap prices are at remarkable high levels not only for wet but also for dry cargo with India
In a separate analysis on the dry bulk market’s prospects during 2011, BIMCO’s analyst Peter Sand said that “for 2011, total dry bulk demand is forecast to grow by 7%, slowing down from the demand hike of 9% in 2010. The solid demand picture in a relatively stable market has seen owners returning to the yards to sign many new contracts. This happens only a year after owners ran to the yards to renegotiate all contracts in order to avoid receiving the vessels that were already on order.
Going forward, the dry bulk market will continue its heavy reliance on Chinese demand: a demand that has been so strong in 2009 and 2010 that trade balances have been skewed more than normal and congestion in ports located in the main loading and discharge areas has been severe. The velocities of the Capesize freight rates movements are expected to continue going into 2011.
Meanwhile, the smaller segments are predicted to be in more smooth waters than the bigger vessel types, as the inflow of new tonnage in these segments is less dramatic and the commodities which they transport are more diversified” concluded Mr. Sand. Will the index fall even below in the forthcoming weeks or the sentiment was just weak after the end of Christmas festivities? The fact is that the market has a long time to experience such dreadful levels since mid April 2009, when the BDI was at 1,534 points.
Source: Nikos Roussanoglou, Hellenic Shipping News Worldwide. Posted by macorship on Tuesday, January 11, 2011
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