Baltic Dry Index Surge Continues, Hits Symbolic 500 Point Mark, Pushes to New 2016 High After Jumping 21% in a Week

The Baltic Dry Index rose to a new 2016 high of 500 Wednesday, as market players report that scrapping of Capesize bulkers is accelerating.

A surge in dry bulk rates that started last week has continued into a fifth session, with the Baltic Dry Index (BDI) Wednesday gaining a further 13 points to hit the symbolic 500 point mark.

The BDI made history last November when it fell below 500 points for the first time ever.

The jump follows a gain of 16 points yesterday to a 2016 high of 487, with today's gain rounding out a week-on-week increase of 86 points, or almost 21 percent.

The Tuesday and Wednesday increases set new 2016 highs for the sector's key benchmark, besting the 473 seen on January 1, 2106; the fact that at the time that was only two points above the then record low serves as a reminder of just how tough things have been, and why analysts are warning the market not to get too optimistic over the recent gains.

Average TC spot rates Wednesday in the Capesize segment rose another $187 to reach earnings of $4,027 per day.

The Panamax segment also made gains, up $180 to reach earnings of $4,940 per day, while Supramax rates rose $32 to $5,036 per day.

Meanwhile, a report from from IHS Fairplay indicates that upwards of 1.5 million DWT in bulkers were sold to demolition last week, the majority of which consisted of Capesize vessels.

Data from IHS Maritime and Trade's Sea-Web was said to show that 165 bulkers have been sent to scrap over the past year, a figure that include 36 Capesize vessels.

"With over 40 Capesize bulkers already been sold in 1Q16 and if the ongoing trend persists, we anticipate well over 100 should be sold by the end of the year - on course to beat the 96 Capesizes sold during 2015," said Global Marketing Systems, a cash buyer of ships for recycling.

Lending support for the increased scrapping activity is news that demo prices are also on the rise.

"To put things into perspective, a Capesize owner can make $1.1 million to $1.2 million more by selling a vessel for demolition compared to six weeks ago," Greece-based Intermodal was quoted as saying.

Earlier this week, Ship & Bunker reported that higher Capesize rates pushed the BDI to a further 21 points to reach 471, the joint highest single day gain of the year.