In what could prove the beginning of a new and sustainable rally for the dry bulk market, the BDI (Baltic Dry Index) posted yesterday its biggest increase in more than two months, jumping by 4.3% on a daily basis. It now stands at 2,546 points (up by 105 points), with all of the submarkets increasing. But, the “star” of the show was undoubtedly the battered Capesize market,
which managed to rise by 245 points at 3,773, where the relative Baltic
Capesize Index (BCI) now stands. As for freight rates they have risen
at $37,049 for an average daily time charter. Just a few days ago, Kong Fanhua, a senior researcher of China Ocean Shipping Group had been quoted as saying that “if you believe in a China story, believe in a recovery in the shipping market”. He maintained that by the end of the year the Baltic Dry Index, the main measure of shipping costs for commodities, could surge by more than 80 percent to return to the 4,000 point level, triggered by increased demand for commodities from China. This rebound would be fuelled by the fact that local governments encourage factory output, especially of steel. Still, few could believe that this scenario would begin materializing during the Mid-Autumn holiday festivities in China. When these remarks were made by China Ocean Shipping at the end of September, the BDI stood at 2,192 points.
Talks on contract iron prices for next year between suppliers and Chinese mills may drive vessel bookings, Kong said. The fourth quarter is also the “traditional high season” for coal consumption, which should boost the shipping trade, he said. State-held China Ocean Shipping owns the world’s largest operator of dry bulk ships. “It’s just like driving a car on a mountain: if you stop in the middle of the mountain, you’ll slide down backward.” Premier Wen Jiabao said on Sept. 10 that China “cannot and will not change” policies, signaling that he will maintain the unprecedented government spending. Kong echoed the view by Glenn Maguire, chief Asia-Pacific economist with Societe Generale SA, who said earlier this month that China’s inland projects to build more roads, railways and warehouses will continue to fuel demand for commodities. China’s gross domestic product grew 7.9 percent in the second quarter, up from 6.1 percent in the three months through March. GDP growth slowed to 9 percent last year from 13 percent in 2007.
More positive news could come from India pretty soon as well. According to yesterday’s weekly report by shipbrokers George Moundreas & Co, compiled by George Grigoriadis, India could also emerge as a potential “player” in the dry bulk market. “India is actively looking for new sources of coal, with Mozambique being the latest trend. According to Coal India Ltd., imports could increase by 140 million tonnes per year by 2012” said Mr. Grigoriadis. He further adds that “this means in simple arithmetic and in Supramax terms, additional needs for 300 ships by 2012, just for this trade. The size of the current Supramax orderbook for the period 2010-2013 is about 50% of this, which is a clear indication that the days of balance (between supply and demand) may not come soon, but they will arrive sooner than what we think”. Still, in the short and mid-term this type of dependence from emerging economies must be reduced during 2010, through a speedier recovery and contribution to tonnage demand from the US, the EU and Japan, in order for the freight market to withstand the delivery of almost five new dry bulk carriers per day, as dictated by the current global orderbook.
Nikos Roussanoglou, Hellenic Shipping News Worldwide