2016 Dry Bulk Rates Will be Lower than Last Year, Says Drewry, as Baltic Dry Index Continues to Slide

The Baltic Dry Index fell for the fifth consecutive session Thursday, shedding 10 points to land at 642.

The Baltic Dry Index (BDI) fell for the fifth consecutive session Thursday, shedding 10 points to land at 642, as Drewry Shipping Consultants Limited (Drewry) said it believes dry bulk freight rates in 2016 will be, on average, lower than last year as market fundamentals are set to "remain challenging."

The news comes as market participants who, after a historically poor start to the year that saw the sector's key barometer bottom out in February at 290, had their sprits buoyed in recent months as the BDI by last week recovered to 715.

News of a fifth straight session of declines that has wiped some 10 percent / 73 points from the BDI will presumably be equally unwelcome news. 

Average spot TC rates in the Capesize segment fell $243 to earnings of $7,175 per day, while the Panamax segment lost $113 to land at $4,850 per day, and the Supramax segment declined $9 to finish at earnings of $6,086 per day.

Drewry, in it latest Dry Bulk Forecaster report, said that a boom in iron ore exports out of Australia and Brazil, and China's seasonal iron ore restocking - which it credits for a recent rise in Capesize employment - will decrease over the next few months.

"Drewry forecasts that rates in 2016 will be, on average, lower than those in 2015, though some improvement in rates will be seen in subsequent quarters in the current year," said Rahul Sharan, lead dry bulk shipping analyst at Drewry.

"Smaller vessel segments such as the Handysize and Supramax vessels have comparatively better prospects going forward as minor bulk demand is set to firm up in the coming months."

Drewry says that a "sharp increase" in layups, order cancellations, and intensifying demolition rates have been helping to correct the dry bulk industry's tonnage oversupply problem, and is expected to result in "modest improvements" for freight rates over upcoming quarters.

On Thursday, Ship & Bunker reported that Peter Sand, Chief Shipping Analyst at BIMCO, says the industry needs to work to "keep scrapping volumes up," even if freight rates hit $10,000 per day.