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Drybulk market still has a long to go

Drybulk market still has a long to go
The Baltic Dry Index?s (BDI) major turbulences as shown by its vast volatility during the previous week, is a testament as to the dry bulk market?s trials and tribulations.

Drybulk market still has a long to go

The Baltic Dry Index"s (BDI) major turbulences as shown by its vast volatility during the previous week, is a testament as to the dry bulk market"s trials and tribulations.

Leaving mixed emotions for dry bulk ship owners, the BDI, which reflects the cost of hauling goods like iron ore and coal onboard vessels, ended its spectacular 24-session run, which saw it reaching up to 4,291 points on Wednesday. In fact, from Monday and up until Wednesday the Index gained 797 point, only to lose more than half of it during the last two sessions of the week. Thus, it ended Friday at 3,809 points, which was enough to maintain an upward trend week-to-week.

Reasonably enough, the main gainers of the previous days were also among the basic losers, with capesize average rates shedding more than $9,000 on a daily basis, versus Thursday, to reach a total of $76,396, while panamaxes followed with $26,077 on average, down by $1,437 on a day-to-day basis.

In fact, as we enter into the new week, it seems certain that the downward pressures will continue, with a consensus being the case for this trend among analysts. As long as this big volatility remains the case for the index, it"s more than obvious that the dry bulk sector is far from re-entering on a steady growth course.

The previous weeks" rises were largely fuelled by a frenzy of iron ore purchases from Chinese steel mills, coupled with inevitable port delays in major key ports for the sector. As soon as the Chinese halted their buys, the market plunged. As many analysts and ship owners have argued in the past months, unless the rest of the world recovers from the economic crisis, the dry bulk market, a reflection of demand in raw materials, will remain in doldrums.

The fragility of the market highlights once more the need to limit tonnage as much as possible, especially when one takes into account the huge pending orderbook. Messages from the demolition front remain optimistic, but the year progresses, it becomes evident that fewer vessels are being sold for scrap. According to data from Drewry Shipping Insight, the total tonnage sold for demolition reached almost 6 million-dwt during the first four months of the year. The number is of course very high, taking into account that during the whole of 2008, the relative amount had reached 4 million-dwt, most of it during the fourth quarter of the year. Still, an alarming factor for 2009 statistics, comes from the fact that in April a mere 851,000-dwt was sold for scrap, versus 1.09 million-dwt in March, 1.5 million-dwt in February and a whopping 2.48 million-dwt in January.

According to Weberseas" latest weekly report, ?India remains the most active buyer for demolition but perhaps the best prices are still achievable in Pakistan in the high 200's. Stagnation is the best word to describe the demolition market in Bangladesh whilst it is nice to see the market in China to continue its demand and maintaining good price levels in the region of US$ 230-240 level? the broker said.

Source: Nikos Roussanoglou, Hellenic Shipping News


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