Baltic Dry Index Breaks 1000 for the First Time in Over a Year

The Baltic Dry Index rose 71 points Friday to reach 1045.

On the heels of a declaration from Drewry Shipping Consultants Limited (Drewry) Wednesday that "market recovery is now underway," the Baltic Dry Index (BDI) rose 71 points Friday to reach 1,045 - the first time the BDI has been above 1000 since August 14, 2015 when the BDI sat at 1,055.

Average TC spot rates in the Capesize segment Friday swelled to earnings of $16,269 per day (+$2,175), Panamax grew to earnings of $8,075 per day (+$437), while Supramax rose to $7,370 per day (+23).

Drewry says over the next five years it expects Capesize one-year time charter rates to double from current 2016 lows.

Overall, Drewry says that a shrinking gap between supply and demand, alongside a slowdown in vessel supply from a high level of scrapping, low deliveries, and few new-orders, is improving the market's demand outlook.

"Dry bulk shipping has bottomed out and a market recovery is underway, albeit a slow one. Rising demand for ships to cater for increasing raw material consumption, together with the effect of shifting trade routes will help increase tonne miles," said Rahul Sharan, Lead Research Analyst of Dry Bulk at Drewry.

"With investment remaining out of reach from dry bulk owners, even a modest growth in demand will help support market recovery. Meanwhile, the increasing cost of running an old ship will mean more vessels go to scrapyards, tightening supply over the next five years," said Sharan.

Drewry further notes that impending additional costs associated with Ballast Water Management (BWM) requirements will lead shipowners to continue to send younger vessels to demolition.

"Owners have hardly been able to cover their operating costs and the additional cost will mean increasing losses," said Drewry.

In September, Golden Ocean Group Ltd. (GOGL) said dry bulk newbuild ordering activity was "almost non-existant," with a total of 11.9 million DWT ordered at that point in the year - 10.8 million DWT of which could be attributed to orders for several Valemax vessels.