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Dry bulk market pauses to "absorb" news from the mining industry |
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Tuesday, 09 March 2010 |
 The dry bulk market ended a frantic week of rallying on Monday, when despite the small increase of the Baltic Dry Index (BDI) by 17 points at 3,259, the industry’s prime capesize sector was down by 46 points. Still, the BDI seems to be back on track, after a slow start of the year.
It must be said though that traditionally, the dry bulk market never
impressed with strong rates during the first quarter of each year, as
the seasonality factor came into play. Safer conclusions on the way
rates will go can be extracted during the period closer to the summer
months.
As for the short term, much will depend on the conclusion of the
negotiations between Chinese steel mills and mining groups. If current
reports of a price rise of contract iron ore by at least 50% are
confirmed, a lot could change in terms of cargoes demand for in the
short term (increase) and in the long term (decrease).
Capping last week’s performance of the market, the latest weekly dry
bulk report by Barry Rogliano Salles (BRS) said that there was a strong
rebound in all the dry bulk segments this week, leading to an 18% jump
in the Baltic Dry Index. The Cape and Panamax markets saw large spikes
driven by activity in the Atlantic and a tight tonnage situation saw
charterers offering high rates in order to pull ships over from the
east. The Panamax market remains strong and the BPI continues to outpace
the BCI.
“The big news of the week was in the coal market where BHP Billiton
announced a new, shorter term pricing structure for a “significant
portion” of its hard coking coal volumes for 2010. This will replace the
benchmark pricing system, and takes advantage of current high spot
rates. BHP said it had reached an agreement with a range of customers
throughout Europe, China, India and Japan. According to reports, it has
already struck a deal with Japan’s JFE Steel for the three months
starting 1 April at US$200 per tonne. This represents a 10% discount on
the current spot rate, but a 55% premium on last year’s benchmark price”
said the report.
Commenting on the capesize sector, which of particular interest to many
ship owners, BRS said that a busy week saw Capesize rates leap upwards
again. As a result of this trend, by the end of the week, the four time
charter average was back just below the “magic” level of $40,000 per
day. “A very tight Atlantic market saw some charterers struggling to
find tonnage and rates had to rise sufficiently to attract ships from
further afield. Overall the BCI rose 24% to 3,900 points, while the 4TC
rose from US$28,370 to US$37,800/day. In the event, rates appeared to
peak on Friday and Monday saw levels fall back. However with demand
still strong for early tonnage in the Atlantic, and FFA prices at around
US$37,700 for second-quarter trading, it seems the market is quite
tightly balanced.
In terms of the second hand market for dry bulk carriers, wher Hellenic
Shipping News Worldwide reported the trends established during the first
couple of months of the year, BRS said that psychology plays a big part
in the sale and purchase market and this week we could see cash rich
players with available finance are now ready to put their cash to work,
rather than keep it in close to 0% interest deposit accounts.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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