Wednesday, December 23, 2009

Pre Holiday Fall For Baltic Exchange Dry Index

Industry Price Guide Back to October Level as Demand Dwindles
Shipping News Feature

LONDON – UK - The Baltic Dry Index fell yesterday to its lowest point in almost two months as trade wound down for the Christmas Holiday. The index has recently been buoyed by an increased demand from China, but the spectre of oversupply still exerts a downward pressure and uncertainty surrounding future requirements means no immediate recovery is predicted by most analysts.

With some container shipping lines creeping into the dry and tanker markets to spread risk, it seems likely that competition for contracts of carriage from bulk owners will maintain the lower rates, and the volatility which has characterised 2009 will move into the first part of 2010. New builds due in the coming months, many having already been delayed by reluctant committed purchasers, will increase supply of vessels however and no consistent, large scale rise in the Index can be envisaged.

Despite the erratic performance of the past year the Index has rebounded much more than was predicted by many industry observers and the pressures on owners to cut rates in all sectors are now seeing resistance from shipping lines in general freight movements. As a consequence of increasing iron requirements, principally from China, and more coal shipments likely to both China and India in the coming months, Copenhagen notwithstanding, some mitigation against oversupply may be possible.

Caution is likely to be the watchword for the Index for the next 18 months. It is to be hoped that demand in the market will stabilise a little; however should the weaker players in the market not manage their affairs properly and fail to scrap surplus vessels this may leave bargain buys for other owners leading to more pressure on rates. Markets other than India and China do seem to be improving gradually as stocks of materials become exhausted which may well assist beleaguered owners.