Don't be Fooled by April 1 Surge in Baltic Dry Index, Analyst Warns

BDI achieved the biggest 2 day jump of the year, gaining a total of 36 points to break the 450 mark.

The Baltic Dry Index (BDI) made its largest jump of 2016 Thursday with a 15 point increase, only to beat that Friday on a 21 point gain, breaking the 450 mark and representing the largest one-day jump since September - although industry experts also warned market participants not to be fooled by the April 1 surge and place too much optimism on there being a meaningful recovery.

Average spot TC rates in the Capesize segment swelled $495 to reach earnings of $3,013 per day, while Panamax saw a $267 rise, to achieve earnings of $4,275 per day, and Supramax held steady at average earnings of $4,981 per day.

However, maritime affairs specialist John Faraclas says that while dry bulk is on an upward trend, industry players need to temper their excitement over the market's recent gains.

"Indeed we can see some upwards trends in the dry markets but neither one or two sizes and respective indices should open your appetite," said Faraclas, adding that recent gains "cannot justify anything whatsoever."

BIMCO's Chief Analyst, Peter Sand, meanwhile points out that rates are still not above OPEX (a rise of 15 percentage points is required before that happens) and capacity utilisation is presently sitting at slightly more than 70 percent.

"As the demand side is moving forward at dead-slow speed, cutting down on capacity is the only way to a significant improvement of the fundamental market balance," Sand reiterated.

The analyst suggests that high-paced demolition sales will need to persist for at least two years before the market is able to get on top of its unbalanced market fundamentals and shipowners have a chance at pulling a profit.

In March, Ship & Bunker reported that the BDI had maintained its upward march for a full month after it reached an all-time low of 290 in February.