Dry Bulk May Be Seeing First Signs of Recovery

The Baltic Dry Index climbed above 1100 points this month.

The dry bulk sector may be seeing the first signals of a recovery as spot rates and the Baltic Dry Index (BDI) show improvements, Shippingwatch reports. 

The BDI reportedly climbed above 1100 points recently, while spot rates for Capesize vessels rose 4.4 percent to $15,894 per day. 

The figures are purportedly still not at sustainable levels, but are a vast improvement from earlier this year when rates were around $4,000 per day and a report in June suggested "at least two and a half years of pain" for the sector.

"This development will help significantly reduce the cash burden of all dry bulk shippers, and should stabilize asset values which will provide additional breathing room for companies with large newbuilding acquisition programs," said Deutsche Bank analyst Amit Mehrota in a research note. 

"On the negative side it may delay, or erase altogether, a more pronounced recovery in 2017, as the current improved rate environment disincentivises additional scrappage."

Some experts have also suggested that the amount of dry bulk products is finally exceeding capacity, especially as the sector continues to scrap aging vessels. 

"The most positive thing right now is the large-scale scrapping of vessels currently taking place, while no new ships are being contracted.

"If this development continues for the next six months, the scrapping will accelerate while the influx of new ships stands at virtually zero," said Herman Billung, CEO of Bermuda-based Golden Ocean Group Ltd.

Late last month, it was reported that the BDI had climbed to a 2015 high, easing some of the intense pressure on dry bulk carriers.