BDI Continues Upward as Higher Bunker Prices Spark Hopes of Support for Capesize Segment

The Baltic Dry Index gained 2 points on Friday to reach 315.

The Baltic Dry Index (BDI) Friday rounded out 2016's first full week of positive movements by gaining 2 points to reach 315, as industry sources suggested that higher bunker prices may help buoy capesize rates.

Average spot TC rates in the Capesize segment nevertheless slipped again Friday, losing $130 on average daily earning to reach $2,642 per day.

The Panamax segment also declined, with average daily earnings falling $30 to $2,844 per day, while Supramax continued its gains, with daily earnings for that segment climbing by $168 to reach $2,995 per day.

While some analysts were said to be expecting Capesize freight rates on major Asian routes to stay flat as a result of oversupply, some ship brokers Thursday said that there could be some hope in the form of higher bunker prices, as ship owners operating vessels on the spot market pay for their own fuel, meaning higher bunker prices could offer support to freight rates.

According to Ship & Bunker data, Singapore IFO380 prices had risen $12 over the week to Thursday.

"Owners are counting on the bunker price but with so many vessels idle and still a long list of open vessels for charter we don't expect too much improvement next week," said a Capesize broker based in Shanghai.

Norway-based Fearnley Shipping, commenting on current vessel earnings, said "with average daily spot (earnings) unchanged at some $2,800, less than half of OPEX, the fundamental question for many owners is why to bother keep [the] propeller running."

Overcapacity in the market is reported to have led owners of around around 45 to 50 Capesize to turn to idling rather than operating at a loss.

"There's at least that number in the Pacific. Ships are also anchored off South Africa," said a Singapore-based broker.

On Thursday, Ship & Bunker reported that, in the face of historically dire markets, dry bulk player Golden Ocean Group Ltd. (Golden Ocean) has scrapped 25 vessels for the year and is "seriously considering" idling its 3 to 5 year old vessels.