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Baltic Dry Index falls below 300 points for first time, experts pessimistic

The Baltic Dry Index has fallen a further five points to reach 298 today, falling below the 300-mark for the first time in its history as dry shipping markets continue to weaken.

The Baltic indices for all dry shipping segments contracted again today, apart from the Baltic Panamax Index (BPI).

The BPI advanced five points and was assessed at 289 on the back of busy chartering activity in the Atlantic basin as a steady stream of cargoes comes out of South America ahead of Chinese New Year. Intra-Asia panamax fixtures, however, have been few and far between.

As the BDI plumbs historic depths, Jeffrey Landsberg, columnist for Maritime CEO and head of Commodore Research, warns Splash readers to keep a lid on their hopes for an upturn.

“Of note to us is that, while on the surface, sentiment for 2016 has become uniformly bearish (analysts are no publishing reports predicting a rally for this year as some were still predicting as recently as in December), rate expectations for this year remain too bullish,” Landsberg told Splash.

Liu Xunliang, secretary-general of the Shanghai Shipbrokers’ Association, shares this sentiment, telling Splash the industry needs to brace itself for a spate of insolvencies – soon.

“A large number of dry bulk shipping companies are on the verge of bankruptcy. Although the prices of dry bulk cargoes like iron ore and coal are also at a very low level, it is unlikely there will be more demand in the current situation to support the BDI,” Liu Xunliang, secretary-general of the Shanghai Shipbrokers’ Association, told Splash.

“If the BDI continues to drop, it will bring more financial pressure to the shipowners; companies’ losses will widen and financing will be even more difficult, which may force the companies to offload assets in order to survive. All of these are likely to trigger the next round of bankruptcies in the industry,” Liu continued.

Deutsche Bank research says 55 dry bulk vessels (4.6m dwt in total) were scrapped during January – a 60% increase over the same period last year. Scrapping activity appeared to increased by 40% in the last week of January, compared to the first three weeks of the year.

In spite of this, the global bulk carrier fleet’s tonnage increased by 0.3% (34 ships, 2.5m dwt total) during January, the bank said. Some 89 bulk carrier newbuildings were delivered last month, with an average vessel size of 80,000 dwt.

“In the coming months we expect net fleet growth to turn negative as the order book burns off and accelerated scrapping continues. But nonetheless the implication of the still-significant newbuilding deliveries is that we’ll need to see significant scrapping well into next year to right-size the market,” Amit Mehrotra Deutsche Bank’s shipping research analyst, commented in his report on January 31.

Holly Birkett

Holly is Splash's Online Editor and correspondent for the UK and Mediterranean. She has been a maritime journalist since 2010, and has written for and edited several trade publications. She is currently studying for membership of the Institute of Chartered Shipbrokers. In 2013, Holly won the Seahorse Club's Social Media Journalist of the Year award. She is currently based in London.
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