BDI Gets Lift from Capes

Baltic Dry Index reaches highest in more than three months with expectations of a stronger market going forward

News ID: 75538

Date: 13 August 2017 - 08:45

THE Baltic Dry Index, a benchmark indicator of the dry bulk sector, has risen to its highest level in more than three months, thanks to a burgeoning capesize market that has seen earnings soar to double the level of operating costs.

According to MANA,The BDI climbed to 1,138 points at the close on Friday, the highest since April 26, according to the Baltic Exchange.

The capesize sector has been the main driver for the BDI to surge with Intermodal calling it a euphoric market. The brokerage expects the fourth quarter to yield even stronger rates.

The average weighted time charter for a standard 180,000 dwt capesize on the Baltic Exchange closed Friday at $16,261 per day, a four-month high. It surged from $10,540 at the start of the month and is almost three times more expensive than the $6,305 on July 10.

With operating costs at about $8,000 per day, the current level is profitable for owners and operators.

“We expect the strong dry bulk trade sentiment to continue into 2018,” Arctic research analysts Andreas Wikborg and Jo Ringheim said in a report, adding that they were particularly excited about the capesize market.

They expect overall dry bulk tonne-mile demand growth of 3.9% in 2017, 4.2% in 2018, and 4.3% in 2019, with demand steadily outpacing supply in the coming years. They estimate net fleet growth of 3.5%, 1.9% and 0% over the respective years, which should lead to higher utilisation levels, rates and values.

Arctic forecasts average capesize rates of $14,000 per day next year, rising to $20,000 per day in 2019, with asset values rising by about 20% in 2018 and some 45% at the end of the decade.