Baltic Dry Index Sheds 56 Points in 4 Days, Falls to 652

Peter Sand, Chief Shipping Analyst at BIMCO, says the industry needs to work to "keep scrapping volumes up" for meaningful recovery.

The Baltic Dry Index (BDI) Wednesday made it a fourth straight session of decline, with a 30 point loss on the day and 56 points over the period to land at 652.

The sharp reversal wiped out gains made since April 18, when the index stood at 659.

While the BDI reached 715 on April 27 - the highest its been since November 2, 2015 - it has been on a downward trend again since then.

Average TC spot rates for Capesize on Wednesday fell $891 to land at earnings of $7,418 per day.

The Panamax segment also declined, losing $146 to settle at earnings of $4,963 per day, while the Supramax segment slipped $2 to land at $6,095 per day.

The BDI's recent tumble has come following many industry experts' warnings that market participants should not place too much optimism on there being a meaningful recovery.

Peter Sand, Chief Shipping Analyst at BIMCO, this week said that gains recently seen in dry bulk freight rates were not linked to a decline in overcapacity, and as such, the industry needs to work to "keep scrapping volumes up," even if freight rates hit $10,000 per day.

"Because the fundamental market balance is still very much off. Overcapacity is serious," says Sand, adding that "we all know what needs to be done, but doing it is still a bit difficult."

"The prospects for the dry bulk market is one that spells out a multi-year recovery. If we can keep demolition levels high (around 40 million DWT per annum) for the coming three years while not placing any more new orders. We will bring back a sustainable market, even at low demand growth."

Last week, as the BDI broke above 700 for the first time since November, Ship & Bunker reported that Freight Investor Services (FIS), commenting on the BDI's gains, said: "the fact that the recovery of the dry bulk market is more akin to the patient sitting up and talking than a Lazarus-like leap out of bed has been somewhat overlooked in the wave of enthusiasm."