Dry bulk market is on the rise again
Proving rather resilient, compared to previous behaviors, the dry bulk market has been on a rebound mode once again, after a two-week fall, which succeded a significant rally.
The Baltic Dry Index has been rising steadily from Wednesday, surpassing once again the 4,000-point barrier, ending yesterday"s session up by a healthy 144 points to reach 4,062 points. Shipbrokers had already warned about the expected increase after observing renewed cargo interest ahead of the holiday season.
In its weekly report, Fearnley"s said that the trend from the last couple of weeks is broken, with the Capesize segment again picking up momentum. Indeed, the Baltic Capesize Index gained 288 points at 6,640 leading yesterday"s session, with the Panamax segment following closely.
Referring to the capesize market, Fearnley"s noted that ?declining steadily some 12% from $73500 to $64500 before recovering, average daily spot earnings now stand at close to USD 70000 and short-terms prospects are bright. Congestion remains considerable in main discharging ports and activity is picking up on the back of increased inquiry by both industrial bodies and operators.
Atlantic is leading the way by means of a very balanced cargo/tonnage ratio, supported by Australian miners absorbing a considerable chunk of prompt Pacific units. FFA levels finally give support to the period fixing taking place earlier in the week, including 180000 dwt/2009 N/B done for 12 months basis Dec delivery at USD 40000 and 180000 dwt/built 2009 fetching USD 42000 for 12 months basis prompt delivery off Muscat? the broker concluded.
According to a quote in Reuters by Adrew Dawson, an FIS broker, ?there is a lot of fresh cargo enquiry in the Atlantic but it seems a large percentage of this is not actually firm business but more talk by traders trying to sell cargoes into a softer freight market". In the longer term though, brokers expect the market to continue presenting increased volatility, before facing increased downward pressure after the first quarter of next year, mainly as a result of an increase of tonnage supply, as more new buildings are bound to hit the water.
But, a series of reports this week, indicated that things may well turn the other way around. For instance, Cosco"s Chairman, Wei Jiafu said at a conference in Shanghai that ship owners may cancel or delay about 40% of new vessel orders (of all ship types) by the end of 2010, as a result of overcapacity concerns. Chinese shipyards have had orders for 88 vessels canceled this year through October, as lines, including Cosco, pare growth because of the global recession. Global shipyards hold bulk-ship orders equal to 60 percent of the capacity of the existing fleet, according to data compiled by Bloomberg. For container ships, the figure is 36 percent.
Meanwhile, in other remarks, this time by Clarkon Plc"s Managing Director Martin Stopford, the orderbook was now 44% of the extant fleet, compared with just 11% in 2000. "My guess is this is at least twice as much capacity as is really needed," he said. The orderbook has a contract value of $464bn, he said, but the actual market value of these ships if sold on delivery "could be half that amount". Ships ordered in past years are at prices 30 to 50% above today"s collateral value, warned the doctor. He urged yards to slow delivery times for the coming couple of years. Owners and yards needed urgent dialogue, stressed Stopford, noting that, "On a purely financial note, someone must be prepared to write off $200bn" he said.
Nikos Roussanoglou, Hellenic Shipping News Worldwide