Baltic Dry Index Could Still Return to Record Lows of February: Precious Shipping CEO

by Ship & Bunker News Team
Tuesday August 2, 2016

Precious Shipping Public Company Limited's (PSL's) CEO, Khalid Hashim, says that the Baltic Dry Index (BDI) could return to the record low rates seen in February if vessel demolitions do not accelerate during the second half of this year, Seatrade Maritime reports.

The BDI Monday fell 6 points to settle at 650, while average spot TC rates were down across all major segments.

Daily Capesize earnings fell to $5,354 per day (-$86) Monday, while Panamax settled at earnings of $5,386 per day (-$152), and Supramax declined to $6,979 per day (-$35).

As Ship & Bunker reported in July, at that time the index rose over the 700 point mark for the first time since last April.

However, on July 19, the BDI began another run of steady declines, falling from 748 on July 18, and has lost ground every day since.

"If scrapping doesn’t accelerate in the second half of this year then the BDI will start to drop from the current levels and we may be faced, once again, with rates that equal the all time low reached in February," said Hashim.

Hashim says that the recent gains seen in the BDI were not attributable to increased demand in China, but rather the scrapping of 22.74 million DWT of tonnage from the bulker fleet during 2016's first half, as well as nearly all newbuilding orders being either delayed or converted to other ship types.

Vessel demolitions are noted to have slowed since the end of Q2, a development that is said to have resulted in a 0.84 percent fleet growth during the first half of 2016 - going against predictions that the period would see negative fleet growth based on the accelerated scrapping seen in Q1.

For its part, PSL has reported a net loss of $13.48 million during 2016's second quarter, compared to $12.03 million in the same period of 2015.

In February, as the BDI fell to new record lows of 290, Hashim said that there could be wave of bankruptcies in the dry bulk sector as owners find themselves unable to secure financial backing due to banks pulling back on uncertain loans.