Shipowner Warns that Dry Bulk Market is "Collapsing"

by Ship & Bunker News Team
Friday February 6, 2015

A glut of capacity, falling commodity prices, and weakening demand from China has sent freight rates for dry bulkers plummeting, with the Baltic Dry Index (BDI) weakening to its lowest point in 29 years, The Wall Street Journal reports. 

"The market is collapsing," said an unnamed Greek shipowner of 14 vessels.

"If this goes on, shipping companies which haven't diversified to other kinds of vessels can very well go belly-up."

The BDI reportedly fell to 577 this week, down from a high of 11,793 in 2008.

Overtonnage is estimated to have been at 20 percent above demand for the past few years, with the amount of dry bulk tonnage having risen 85 percent since 2008. 

Many of those extra ships are thought to have been ordered prior to the 2008 global financial crisis, with those companies having suffered from the world's slow economic recovery in the years since. 

China has also reportedly cut down on imports of thermal coal and iron ore.

"The Chinese also don't want cargoes arriving during the festivities of the Lunar New Year, so activity will stay very low," said Rui Guo, an analyst with London-based ICAP Shipping. 

"I expect the BDI to slowly start recovering after the Chinese New Year [Feb. 18-24], but I don't see any big upswing."

Earlier this week, China-based Zhong Chang Marine Co. Ltd. warned the Shanghai stock market that its 2014 results had been hit hard by the poor dry bulk market. 

Ship & Bunker News Team
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