Dry bulk market adopting waiting stance, expecting the "China factor" to weigh in.
Hot on the heels of last week"s positive trend, the Baltic Dry Index kept its momentum Monday, although one could maintain that in reality, the dry bulk market seems to be on a waiting stance, with all eyes turned to China. This factor is expected to shape this week"s trend, with many Chinese heading back to work, after the celebrations for the Lunar Year. This translates to Chinese steel mills begin working again, thus determining their iron ore needs. As a result, more is expected to be seen as the week evolves.
For the time being, the BDI was up by a mere seven points on Monday at 2,721, still quite lower than the beginning of the year. But, as we"ve said before, traditionally the first quarter of each year is a rather a quiet one for dry bulk trade. Monday proved to be a losing session for owners of capesize vessels, but all the rest ship types headed higher, with the panamax sector making the most of it.
According to Barry Rogliano Salles" latest weekly report on the dry bulk market, the latter was along by the Capes last week, as ?fresh enquiry breathed temporary life back into the market. Short period rates also rose above spot rates for both the Capes and Panamaxes, suggesting there is some confidence for the medium-term once the Chinese holidays are over. In the mining markets, Fortescue announced a steep drop in net income for 2009 but reiterated claims that demand would outweigh supply in the current year. And a new report from accountancy firm Ernst & Young predicts 2010 will once again see lively merger and acquisition activity in the mining industry on the back of bullish demand forecasts. After a quiet couple of years in which "only" US$60bn of M&A deals were completed (half by China), Ernst & Young predicts deal volume could return to 2006 levels of around US$175bn this year?, BRS said.
Commenting on the capesize trade, the report mentioned that it showed signs of revival this week, with the four time charter average rising above $30,000 once again. Overall the BCI rose 8% Friday-to-Friday, with most of the gains seen on the trade into China. Although there has been no long term period since the middle of the month, short period activity continued to tick over at fairly robust rates. A 170,000 dwt vessel was reported taken for 4-6 month deal at US$37,000/ day, while there was a further report of US$41,000 per day for a 5-7 month charter. Rates dipped again on Monday however, and most players are watching to see how trade pans out in the coming days? the shipbroker said.
As for the panamax market, last week was a pretty flat one, as Chinese players were celebrating the New Year. Still, overall there was still a positive note. The general volume of business was obviously thinner and most of the business fixed was for 1 or 2 laden legs with spot deliveries. Atlantic cargoes were limited and rates for transatlantic rounds were in the region of US$25-27,000 depending on size and position. The fronthaul activity was really quiet and only Indian loaders could still obtain healthy numbers for time charter in the mid- US$30,000s. The Pacific rates were negotiated in the low US$20,000s. Very few operators took the risk of fixing tonnage for short period in this very slow market, and instead are waiting to see what this week brings.