The Baltic Dry Index being unable to post a single session gain for the past month.
The dry bulk market"s weakness is once again troubling ship owners, with the Baltic Dry Index being unable to post a single session gain for the past month. Last week proved the fourth straight week of losses, with the BDI shedding more points, especially in the panamax index, which retreated by over 300 points or 20%. Other indices were also lower between 6% and 8%. Monday didn"t hold any surprises, since the BDI again lost ground to end the session at 1,486 points (down by 20 or 1.3 percent), the lowest level it has been in two months and more specifically since February 4.
The main reason for the market"s ailing picture is the absence of Chinese buyers of iron ore, the raw material used to produce steel. With renewed fears that too much material is being stocked up in Chinese ports, the market"s retreat is regarded as a natural development. Iron ore stockpiles in China grew by 14 percent in March. At the same time, steel demand is likely to shrink by 9 percent during 2009, according to Citigroup"s analysts, citing the fact that demand from traditional steel clients, like carmakers and builders has dropped, along with the global economy. As a result, the dry bulk market is suffering. In fact, Deutche Bank said yesterday that global steel consumption is likely to contract by 17 percent this year. The steel industry accounts for almost half of all seaborne bulk cargoes, according to Amrita Sen, an analyst with Barclays Capital in London. Even grain trade is proving rather thin and slow, something not expected to change, at least during the following couple of weeks, with Easter Holidays closing in.
Capesize forward freight agreements for the third quarter, used to bet on future shipping rates, rose 0.9 per cent to US$17,875 a day on Friday in Oslo. Futures on panamax vessels gained 4.5 per cent to US$11,375 a day for the same period, data from broker Imarex NOS ASA showed.
Despite all this, the activity in the sale and purchase market remains notable mainly from the cash buyers who have not made any moves in the last 3-4 years and see the market slow down as an excellent opportunity to build up or replace their tonnage. ?Such controllable moves do have our consent? said Weberseas in its latest weekly report.