Baltic Dry Index Achieves Full Month of Gains, Rises to 388

Monday March 14, 2016

The Baltic Dry Index (BDI) has now maintained its upward march for a full month, reaching 388 on Friday from its all-time low of 290 a month ago, as news surfaced that Chinese shipping giants, China COSCO Shipping Corporation Limited (China COSCO Shipping), China Merchants Group, and ICBC Financial Leasing Co., Ltd. (ICBC Financial Leasing), have purchased 30 Valemax vessels amid market overcapacity.

In terms of average spot TC rates, daily earnings for Capesize vessels Friday fell $46 to $2,172 per day, while both Panamaz and Supramax rates rose to $3,827 per day and $4,391 per day, respectively.

However, with spot rates still far below OPEX, the Chinese vessel purchases are reported to be seen as an effort to increase China's control over iron ore shipments from Brazil in order to boost demand.

"Despite the collapse in the dry bulk market, the Chinese are ordering new vessels to effectively control iron-ore freight rates over the next 10 years or so," said Basil Karatzas, Maritime Adviser of Karatzas Martine.

"This will put more pressure on dozens of independent ship owners struggling to cope with record low freight rates."

Some market players are reported to believe that positive news out of China's iron ore market over the last eight weeks may continue to support a continued positive trend for the BDI, citing the positive demand results in that market coming at a usually slow time of year in China.

Last month, the BDI fell to new record lows of 290, Khalid Hashim, CEO of Precious Shipping Public Company Limited (PSL) said that there could be a wave of bankruptcies in the dry bulk sector as owners find themselves unable to secure financial backing due to banks pulling back on uncertain loans.