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| Economy |
| Baltic Dry Index Oscillates in Upper 600-Point Range |
| 2016-08-20 |
| The BDI has steadied since pushing toward 700 points, and has shown slight, downward corrections this week, which indicates that the climb may be running out of steam, but some optimism about Q3 and Q4 shipping activity is limiting losses. Even though some optimism may be driving the BDI higher, there is currently a mixed consensus on what is in store for the BDI as the year winds down, and there is an argument for both an increase in prices, and a decrease. The BDI’s value depends on the demand to transport raw materials. So far this year, demand has been strong, supported by increased building in China, an increase in demand for coal imports to China, and strong harvests and demand for soft commodities. While soft commodity demand will persist into later this year, there is a mixed opinion on what will happen to the coal and iron ore market. Both commodities are major cargoes that are transported by the BDI’s largest component ships. Some believe, that after a solid performance in the first half of the year, demand will fall starting in September. This sentiment is backed by data showing that iron ore purchases typically contract in the fall. On the other hand, there are those who think China will ramp-up iron ore purchases in the fall to last through the winter season, and this will provide a boost to shipping demand. Supporting this opinion is the fact that this year, iron ore’s seasonality has not been typical, with demand lasting later into the season than expected. On Thursday, the BDI fell 3 points to 682. The BDI has managed to trade just below 700 points over the past few weeks even though demand for cargoes has been somewhat muted. The reason for the resilience has been the hope that if August activity is low, then September shipping activity should heat up in preparation for the upcoming winter. Source: EconomicCalendar Dry bulk Capesize, Panamax markets may rebound in Q4 There could be a rebound in the dry bulk market in the fourth quarter, driven by a recovery in iron ore, coal and grain trade, shipping consultancy Maritime Strategies International said Thursday. One key driver will be a new operation at western Australia’s Roy Hill iron ore mining project, which is “ramping up more quickly than expected and should reach just below its maximum capacity by December,” MSI senior analyst Will Fray said. “Seasonal coal trade should also provide some support for Capesize shipments into China. We continue to forecast Capesize spot rates over $10,000/day in October, but rates will most likely drop early in the new year on seasonal trade weakness,” Fray added. With the August Capesize time-charter average contract pegged August 17 at $4,525/day by Freight Investor Services, and the Q4 contract at $8,250/day, MSI predicted an average spot earnings level for a modern Capesize in October 2016 at $10,400/day. In the Panamax market, MSI forecast an average spot rate for October 2016 at $7,000/day, compared with FIS’ $5,550/day for August, and $6,625/day for Q4. MSI said that the recent strength in Chinese and Indian coal imports “have diverging causes” and may cancel each other out as China’s stronger imports hold up India’s near-term decline. At the same time, winter stockpiling in the rest of Asia could end up supporting Panamax demand as Q3 gives way to Q4. In coming months, the dry bulk market may also receive some support from US grain exports, with the International Grains Council increasing its estimate for US wheat and coarse grain exports by 6% for the 2016-17 season, while slashing Brazilian corn production estimates by 10%. But MSI said it foresaw slim opportunities in the Handymax and Supramax dry bulk freight markets in the next six months. This is because, despite strong grain expectations out of the US in the remainder of this month and September, the Handymax/Supramax segment is still being weakened by strong newbuilding deliveries. In addition, hopes for a resumption in bauxite trade from Malaysia have diminished with yet another extension of the ban on production until the middle of September, MSI said. Source: Platts |
| Posted by:badanov |