In Dry Bulk Market,International Shipping News 25/02/2015
Shipping companies are banking on increased iron ore exports from Brazil to China and India to shore up the dry bulk freight market, after it touched a new low earlier this month.
While the tanker market was relatively buoyant the last few months due to low crude prices and concomitant increase in demand for shipment, the Baltic Dry Index (BDI), which measures the cost of shipping bulk cargoes on key ocean routes, fell to its lifetime low in the first week of this month.
The first week of February saw the BDI slump to 560 — it slid steadily from 1,300 in mid-November to 800-odd in mid-December. Before this, the lowest the index had touched was in February 2012, when it slipped to below 700. At its peak since the index came into existence, it touched close to 11,000 in May 2008.
Ship owners who have put their bulk carriers in the spot market are finding it increasingly difficult to maintain the viability of their operations. At the current levels of the index, bulk carriers such as Capesize and Supramaxes are barely getting a rate of $5,000 a day.
In the current situation, shipowners feel an increased flow of iron ore from Brazil, the world’s second largest producer, could boost the rates, as hauling the ore from there to China cost almost double than that from Australia.
“We hope that they (Brazil) are able to sell their iron ore more competitively than the Australians, because Brazilian iron ore to China is the best possible thing to happen to dry bulk shipping,” Shivakumar, Group CFO of Great Eastern Shipping, told an analysts’ meet earlier this month.
Brazil’s Ministry of Industry, Development and Foreign Trade had, last month, said iron ore exports from the country had increased by over 17 per cent in December to cross 37 million tonnes (mt), compared with the year-ago month, as its chief producer Vale SA cranked up production. China remained the top importer of the ore, with more than 20 mt, with the other importers being South Korea, India and France.
Another hope of the rates picking up is the higher scrapping of old vessels in the last few months — this will keep a leash on the number of ships chasing shrinking cargo volumes. Last year, about 16 million DWT bulk carriers went to scrap yards.
“This year, in the first month, we have seen excess of two million DWT getting scraped, so that is one sign that scrapping is going to pick up,” Shivakumar said.
One fall-out of the crashing bulk shipping rates is the fall in prices of second-hand bulk carriers, which are estimated to have fallen by at least 10 per cent last quarter. Shipowners are weighing the option of buying the cheap assets and waiting for the markets to pick up.
