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Dry bulk market in dire situation

Thursday, 19 January 2012 | 00:00
The dry bulk market has been suffering gravely at the start of 2012, with January proving to be a "hellish" month so far and the worst part of it is that with China's week long holiday closing in, things are about to get even worse before they start improving. Yesterday, the BDI (Baltic Dry Index), the industry's benchmark was down by yet another 4.93%, ending the session at just 926 points. The index hadn't seen three digits since Lehman's collapse back in 2008, when, as a result, global trade was brought to a halt, as a result of the absence of bank guarantees for cargoes. The Capesize market lost another 2.94% yesterday, while the Panamax one was down by 4.82%.
In its latest report, commenting on the Capesize market, shipbroker Fearnleys said that "the collapse is complete as earnings for this segment have come down to below operating expenses, at which resistance is finally felt. A free w-o-w fall of some 40% has turned into leveling out at a daily average of no more than USD 7k. Industry disruptions due to weather conditions in both Brazil and Australia are partly blamed, but the single most important reason for the present misere remains tonnage oversupply - including a number of January
2012-deliveries. Despite a spot market being very dull and without direction, certain players still pick period tonnage. Latest conclusions include 180kdwt/blt 2012 ex Imabari yard 12th Jan at USD 12,500 for 4-6 months, also 170kdwt/blt 2004 delivering China sh Jan for 11-13 months at USD 13k" said Fearnleys.

In a separate report, Shiptrade Services said that "the market crumbled due to lack of cargoes and over supply of tonnage with the bad weather conditions in West Australia, Brazil and Colombia playing a major role. The average of the four T/C Routes decreased by USD 6,350, closing the week at USD 9,100 and the BDI fell down by 581 points. Rates for the T/A round concluded at around USD 9,000, while the fronthaul trips were put in a halt due to the bad weather in iron ore terminals. Pacific was quiet during the week with limited coal activity and Australia being knocked out by the weather. Dampier/Qingdao was negotiated around USD low 8,00 levels from owners while charterers were aiming USD 7.75 pmt".
Similarly, on the Panamax front, Shiptrade mentioned that "in the Atlantic the lack of cargoes and over supply of vessels led to fronthaul rates to a steep fall at USD 18,000 levels. Most charterers exploited this situation and fixed on aps basis with much less ballast bonuses than anticipated compared to the previous week. TA round voyage lost USD 3,000 closing the week at USD 10,500. Pacific Basin followed the same pattern with the last weeks and fell even more. Owners chose to ballast to ECSA since rates at the Far East region moved around USD 7,000 per day. Owners did not commit their vessels either to short or long periods as the rates are extremely low" said the shipbroker.
Fearnleys also noted that "the Panamax market has experienced a dive in rates compared to last week. The average rate has decreased 20.74% since last week which has been dramatically, but not to the same extent as for the Capes, with a decrease of 41.42%. The situation we are experiencing is amongst other things caused by financial disturbances in Europe and less demand for commodities like i.ore and coal. We see coal cargoes under contracts being postponed and even cancelled and this will of course influence the market with more vessels free in the market. With Chinese New Year approaching we do not expect any immediate recovery. In the Atlantic we see vessels fixed at ard USD 10k and even lower. Fhauls are being fixed at low 20´s depending on vessels specs and in the Pacific we see rates slide even further and rounds fixed at 6-7k. The period market has been somewhat active on the shorter periods, where the takers now see the lvls with little risks. 4/6 months been reported at USD 9,850 for Feast dely" said Fearnleys.
Finally, on the Supramax front, Shiptrade said that "in the Pacific the ballasters from Far East rushed to fix before the upcoming New Year. In the USG the grain stems were covered earlier than expected and this led over supply of tonnage in NCSA. Black Sea market seems steady with the rates being stabilized at low-mid twenties for SE ASIA/FAR EAST and at mid-high twenties for Middle East/India respectively. Scrap stems from Continent and USG were covered by supramaxes and the rates from Continent to East Med were around low-mid teens.
In the Pacific most owners rushed to fix before the Chinese New Year but the Indian buyers still paying better than the Chinese. Most fixtures were concluded on basis dely aps Indonesia. Coal traffic to China was reduced during past week and owners who don’t carry Nickel Ore kept their vessels spot or ballasted them towards Australia" concluded the Piraeus-based shipbroker.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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