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Dry bulk market faced with oversupply |
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Tuesday, 29 September 2009 |
 Despite yesterday’s slight upwards trend of the Baltic Dry Index (BDI), it’s becoming increasingly clear, that the market is coming face to face with the issue of oversupply of tonnage. The BDI began the week with a marginal rise of 9 points at 2,192, with most of it down to the capesize sector. Still, last week saw
another fall of the index, which lost 7% on continued poor sentiment.
With the market remaining subdued, among the critical parameters for
the future will be the pace of new building deliveries, at least until
the end of 2009, together with a potential increase of cargoes. For
now, August proved the month with the lowest number of deliveries from
shipyards, while more than 30% of previously scheduled deliveries of
vessels during the first six months, have yet to reach the water. These
are ships whose delivery has been rescheduled for later after relative
agreements with yards, or for ships which were ordered but haven’t
secured financing and contracts are most likely to be cancelled.
According to market figures, dry bulk carriers’ deliveries were lower
by 54% in August, compared to the previous month (July). In the
container segment things were a bit different with the bulk of the drop
in deliveries occurring in July (-43%) with 65,000-TEUs being provided
to their new owners. Instead, during August there was a slight increase
with 66,000-TEUs being delivered. As for tankers, their deliveries were
lower by 52% in August on a monthly basis, which is the highest drop
since the beginning of the year.
But, as we are entering the last quarter of the year, new building
deliveries are expected to pick up, which can explain – among other
reasons – the fact that the dry bulk market is suffering during the
last few months. For the time being though, dry bulk is facing other
challenges, closely related with the expectance of a recovery in the
steel sector worldwide, which could trigger demand for more cargoes
(apart from China). In its latest weekly report Barry Rogliano Salles,
commented that in the wider commodity market, there was clear evidence
of the recent capacity restarts in the steel industry. According to the
World Steel Association, total global steel output rose to an 11-month
high in August, and while most regions showed a decline in production,
Asia recorded a gain of 10% and the Middle East 15%. “Fears remain that
some of these restarts are premature, however, and Arcelor Mittal
predicted it could be 2012 before steel markets returned to pre-crisis
levels. In the shipping market, the world’s largest iron ore miner Vale
signed a landmark deal with STX Pan Ocean to ship 300 million tonnes of
ore over a 25-year period starting in 2011 – 2037. This will meet STX’s
stated goal of securing more fixed revenues streams in the current
volatile market. The contract is equivalent to shipments of
approximately 12 million tonnes per year. Although this marks one of
the largest consecutive voyage deals in history, Vale is currently
producing ore at an annualized rate of around 230 million tonnes per
year” said BRS.
Commenting on the market’s outlook the broker said that a glimmer of
hope has been seen in the paper market, where medium-term prices picked
up significantly. The fourth quarter of 2009 is now trading at $24,920,
a rise of 6% on last week, while Calendar 2010 is priced at S$23,000,
against previous levels of around $21,900. Still, as Clarksons pointed
out in yesterday’s weekly report, “with a bloated forward orderbook
across a spectrum of sectors - the argument remains that we are still
yet to see the real impact of these deliveries”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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