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Dry freight rates on the fall again

Dry freight rates on the fall again
The dry bulk freight market will remain at low levels for months to come, as proven by the Baltic Dry Index?s returns from March onwards.

Dry bulk freight rates on the fall again

The dry bulk freight market will remain at low levels for months to come, as proven by the Baltic Dry Index"s returns from March onwards.

After the rally of the first two months of the years, which was a normal reaction of the market, rates have succumbed to downward pressures, unable to return back at healther and more sustainable levels, which according to some analysts should be at about 5,000 points.

Monday was once more a plunging session for the BDI, following the trend set on Friday, when the the index lost 1.3 percent or 24 points to 1,873. Yesterday, the index lost a further 34 points to end at 1,839 points, losing steam once again, despite the fact that it managed to gain 25 percent from the fall of the previous five weeks.

The panamax index lost the most yesterday, to end at 1,575 points, down by 87, while capesizes also shed 51 points to end at 2,443 points. On the contrary, smaller vessel types managed to post positive returns, rising by 18 to 1,453 points (Supramaxes) and by six points at 698 (handies).

Market analysts suggested that what"s absent is a clear direction. With the steel industry accounting for almost half of all seaborne bulk cargoes, things are looking pretty grim for 2009. Yesterday, the World Steel Association predicted a fall of 15% in steel production during this year. Mr. George Grigoriadis, financial analyst at George Moundreas, speaking at Hellenic Shipping News, said that China alone can"t raise the market. ?During the first quarter of the year, Chinese iron ore imports were equal to the same period of 2008, with buyers looking to replenish stocks at lower prices. Despite that, the market didn"t manage to post healthy earnings, still remaining at incredibly low levels.

This is because activity and imports in the rest of the developed world took a steep dive. So, until the economic situation improves at these nations, the dry bulk market won"t experience better results, not to mention the huge challenge posed by the large orderbook. In our opinion, the potential rebound of global trade, expected between the final quarter of 2009 and the second quarter of 2010, won"t be reflected in the dry bulk market for some months? said Mr. Grigoriadis.

In fact, construction of new dry bulk carriers is likely to push rates down, despite the fact until now up to 100 orders for bulkers have been cancelled. Current orders will expand the world fleet by 17 percent this year alone, to 495 million dwt tons, according to Drewry Shipping Consultants. About 2.5 per cent of dry-bulk vessels were demolished in the past six months, up from practically zero in recent years, and as many as half of ordered dry-bulk ships may not take to sea, D/S Norden A/S, Europe's biggest commodities-shipping line, said last week.


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