Baltic Dry Index Surges Through 600, Rounds Out Week With 2016's Largest One-Day Gain to Reach 635

The Baltic Dry Index rounded out the week by breaking the 600 mark and making the largest single day gain of the year, rising 38 points to reach 635 Friday.

The Baltic Dry Index (BDI) rounded out the week by breaking the 600 mark and making the largest single day gain of the year, rising 38 points Friday to reach 635, while industry analysts suggest that the index's current run of gains could slow within the second half of 2016.

Average spot TC rates in the Caepsize segment Friday rose by $892 to reach earnings of $7,076 per day, while Panamax rates were up by $219 to reach $5,796 per day, and Supramax gained $120 to land at earnings of $5,494 per day.

Meanwhile, the IHS Dry Bulk Freight Rate Forecast predicts the recent surge will flatten in the latter half of 2016, before a "transitional" 2017.

Luciana Salles, principal trade analyst at IHS Maritime & Trade, adds that, while short bursts of positive movement can be expected, the BDI's long-term direction still remains uncertain.

"Many questions remain, however, as to when the current situation in the dry bulk markets will give rise to more sustainable rates on the whole, and whether the overall macroeconomic situation and the fundamental drivers can engender enough confidence to see a price recovery for a more prolonged period of time," said Salles.

Salles also cautioned that, while the industry was well known for its cycles of growth and decline, "to presume that all cycles are the same is going to prove a very expensive mistake."

Despite the unclear outlook, Salles says it is possible that 2018 could mark the beginning of a more balanced market, so long as the current outlook for the global economy is upheld.

"Meanwhile, we can expect episodic volatility – much like the one we are in now – as supply and demand variables get worked out by the natural order of the markets," concluded Salles.

As Ship & Bunker reported last month, in an effort to restore market balance, ships as young as three years old are now being considered for scrap.