Dry Bulk Market Continues to Rally

A boost enjoyed by the dry bulk market at the beginning of the second quarter has been sustained, with the Baltic Dry Index appreciating significantly in the past few months.

News ID: 76218

Date: 12 September 2017 - 10:16

According to MANA, The BDI, a benchmark indicator of the dry bulk sector, jumped to a five-month high on Friday and is just six points shy of the 1,338-point mark registered on March 29, which is the highest level attained over the past three years.

The index jumped to 1,332 points on September 8, compared with 1,038 points a month ago, a 22% increase.

A contributing factor for the improvement in dry bulk fortunes has been the continued gains in the capesize segment triggered by China, which still remains the driving force behind the increased seaborne volumes of iron ore, coal and steel.

Chinese iron ore imports from Australia have risen 11% in August this year to 35.7m tonnes, port data released by Pilbara port authority show.

According to China's customs preliminary trade statistics, China imported 25.27m tonnes of coal in August, an increase of 29.9% from 19.46m tonnes in July this year.

Year-to-date coal imports are now at 177.97m tonnes, up 14.3% during the same period a year ago.

Meanwhile, as a reflection of the incredible domestic demand appetite, monthly coal exports from China have fallen to the lowest level on record, dropping by 87.4%.

The market recovery also follows the path of several key bulk commodities such as steel, iron ore and coal, which have all seen prices pushing up in recent months on the back of stronger than expected demand fundamentals.

Trade flows in recent months have been strong, given momentum by rising commodity prices.

Furthermore, Brazilian shipments have been picking up after a slow first half of the year, with the combined output of all the iron ore terminals now well in excess of 1m tonnes a day.

This outflow from the Atlantic has also been supported on a seasonal basis by the grain trades, it added.

The positive feel in the market has also been reflected in the forward freight market.

Braemar ACM pointed out in a report that a one-year time charter for a capesize has jumped from about $12,000 per day to $16,000 a day and the fourth quarter FFA moved from sub-$16,000 levels to near $18,000 per day.

Paper to cover-wise, the first quarter of 2018 has also improved, although at a slower rate than the recent quarter, increasing the spread between first quarter next year and the final quarter of 2017, it said.

It is not known how long this momentum in spending and imports might last, and how high the BDI could climb.

The bulk bonanza is expected to continue beyond this year, with the market propelled by strong commodity markets, longer voyages and reduced vessel speeds. Shipyard difficulties will add to those factors. However, a slowdown in scrapping and the increased number of newbuildings will again put pressure on rates.

About 145 new ships have been ordered until August this year, VesselValue data showed, out of which 82 vessels were ordered in July and August alone.

The chief executive of Thai-based handysize and supramax specialist Precious Shipping Khalid Hashim believes the initiatives taken by the owners last year to scrap their vessels have paused too soon.

“The problem has been that scrapping in the first six months of last year was approaching all-time highs while the scrapping in the first six months of this year has been dismally low,” Mr Hashim said.

“As a result, if demand slows down for any reason at all, then it will have a big impact on the BDI because supply has been .increasing at a much faster pace than all of last year