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The bulk carrier Tokyo Bulker passing the Golden Gate Bridge on its way from San Francisco to Lanshan, China

The bulk carrier Tokyo Bulker passing the Golden Gate Bridge on its way from San Francisco to Lanshan, China

2016 – A Year of Huge Ups and Downs in the Dry Bulk Carrier Market

After the Baltic Dry Index (BDI) hit a historic low of 290 points in early February this year, creating a sentiment of pessimism across the industry, the bulk carrier sector began to make its climb toward recovery. The year began positively, with the BDI standing at 473, and then the bottom fell out on February 10. For the capesize sector, things continued to fall to the darkest depths – the nadir being on March 17. By November 18, BDI not only recovered to much healthier levels, but it spiked to 1,257 points. Since then, it has come down to 1,090 points, 13% below where it stood in October. The recovery can be observed in capesize rates which were $1,994 per day in late March, rising to $19,364 per day on November 18. The latest jump was short-lived. Over the last three weeks, we have seen the price fall to below $9,000 per day.

 

China Continues to Impact the Shipping Markets

Many of the fluctuations can be attributed to China’s continuing strong influence on the world’s dry bulk shipping market. Recently, China increased imports of coal and iron ore, raising the freight rates. In fact, in November 2016 China imported 14% more iron ore than it did during the same period in 2015, a total of 92 million tons. Once China’s National Development and Reform Commission began the task of cleaning up the domestic production of coal earlier this year, the prices of coking and thermal coal prices more than doubled. From January to November, 2016, iron ore imports reached 935 million tons, giving every expectation that imports will exceed 1 billion tons in 2016. Chinese coal imports have also reached high levels, rising to approximately 4 billion tons. All of these factors are good news for the bulk carrier market, which will finally have the opportunity to reduce its shipping capacity excesses.

Nevertheless, as history has borne out, the markets are volatile and the direction of the fluctuations cannot be guaranteed. What we can expect is a market correction at some point, to cool down any enthusiasm for flooding the seas with fleets that may return with disappointing results.