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| Baltic index flat, rates for bigger vessels rise |
| 2016-05-14 |
| The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, remained unchanged on Thursday, even as rates for capesize and panamax vessels rose. The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, was flat at 579 points. The capesize index rose 11 points to 724 points. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $31 to $5,552. Freight rates for large capesize dry cargo ships on key Asian routes are set to hold around the current levels next week, after having slipped to multi-week lows this week, as higher fuel prices provide support in a lackluster cargo market, ship brokers said on Thursday. The panamax index rose six points to 589 points. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $49 to $4,709. Among smaller vessels, the handysize index slid two points to 347 points and the supramax index was down five points at 555 points. Source: Reuters (Reporting by Apeksha Nair in Bengaluru) Bulk shipping falters as commodities stumble Color charts at the link The Baltic Dry Index (BDI) has been notoriously volatile this year. After touching an all-time low of 290 points on 10 February, the index shot up to 715 on 27 April. But, since then, it has declined 17% till 10 May (see chart). What gives? For one, the drop to the lowest level in the index, which tracks transport costs on international trade routes for dry bulk commodities such as coal and iron ore, was overdone. Two, the Chinese stimulus held out hopes of higher demand for commodities, especially steel and iron ore. But higher iron ore inventories at Chinese ports could well weigh on demand in the coming days and reflect in the index performance. In any case, there were doubts on the sustainability of either the commodity rally or BDI’s increase to begin with. Also, it’s important to note that despite the rise from the pits, the rates are not profitable. The current levels of BDI are still way below the break-even levels of 2000, wrote analysts from ICICI Securities Ltd in a note on 9 May. “As metal prices recover, scrapping volumes for the first four months were at 17 million DWT compared to 42 million DWT in CY15,” pointed out the report. Importantly, “with the current order book estimated at ~20% of the existing fleet size, scrapping needs to continue to keep these BDI rates sustained,” added ICICI Securities. DWT refers to deadweight tonnage and measures the carrying capacity of a ship. Oversupply of ships and subdued global trade has been a plague for the shipping industry. Container shipping indices too have suffered. The Shanghai (Export) Containerized Freight Index (SCFI), which reflects spot rates for container transport from Shanghai to the rest of the world, and the China Containerized Freight Index (CCFI), a broader measure tracking spot and contractual rates from China to the rest of the world, have declined from the beginning of this year. Global container demand is estimated to have grown around 1% during the March quarter, while the global container fleet grew by more than 7%, according to a recent Maersk Group presentation. Dharmakirti Joshi, chief economist, Crisil Ltd, said China is facing rough weather as far as exports are concerned and the country’s trade linkage with the rest of world has definitely weakened. “The way China used to export earlier I don’t think that will happen in future as the country slowly phases out its low value added products from trade activity and rebalances its economy towards consumption from investment/export led growth,” added Joshi. Add to that, subdued demand from other economies too is expected to weigh on global trade. Simply put, if trade does not expand faster, the shipping industry will bear the brunt. Source: Livemint |
| Posted by:badanov |