Analysis Of The Sea Shipping Market

Analysis Of The Sea Shipping Market

 

     The Baltic dry Index (BDI) plunged 828 to 2,423 on September 1 from 3,251 in early August. That is to say, the index dropped 25.47 percentage points in the whole August. Despite the fact that the composite index slightly went up 2 that day, the Capasize market is still not that good. But BDI did not continue to slump due to a 3-day rise in Panamax charter rate.

     Iron ore transport affects the movement of the index a lot as it accounted for the bulk of the dry bulk market. The transaction volume at ports and in the voyage charter market both sank in August compared with July. In August, China's steel market incurred a sharp fall and therefore domestic buyers were reluctant to procure iron ore. Moreover, iron ore shipments to China hit an all-time high in July and iron ore stockpiles surpassed 70 million tonnes at ports. Demand for iron ore from China consequently declined, resulting in a reduction in cargo volume.
 
      The estimate for Capesize market again went down in the FFA market in the first day of September. Capesize rates were at US$37,250 per day last weekend, while they dived to US$35,250 per day on September 1. "The first day back from bank holiday produced a low volume day that thinned out considerably post index…Despite some support the general negativity lead to another short sell off as the afternoon progressed. Buyers were present on close but little points to a positive day tomorrow," said FIS in a report. As a result, insiders still take a dim view of the Capesize market.
And there are two other factors responsible for the flat market. One is weak demand and the other is mounting carrying capacity. According to Clarksons, 59 new vessels were delivered in July and 32 in August. Of the 32 new vessels, 13 are Capesize with 2.6 DWT and 6 are Panamax with 500,000 DWT as well as 9 Supper handymax with 500,000 DWT. The remainder is 4 Handymax with 200,000 DWT.
 
        However, relatively stable BDI was supported by demand for Panamax. Transportation of cargos including grain from South American and commodities from India/Australia brightened Panamax market. At the same time, speculative charterers concluded fixtures, pushing freight rates.
Insiders are still positive about BDI performance in following months. It is estimated BDI will rebound in Q4 since grain transportation and other industries restored. In addition, stocks of iron and steel in Japan and Europe will restore, further stimulating demand from China. As a result, port congestion problem will get worse, offsetting the oversupply of carrying capacity.

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