London: The Baltic Dry Index (BDI) today reached 559 points, its lowest level on record, and analysts say the index will continue to trend downwards.
The BDI’s previous all-time low came in February 2012, when an influx of bulker newbuildings entered the market, diluting already weak demand.
Once again, analysts say over-ordering is to blame, resulting in excess tonnage.
“Cargo demand has risen but nowhere near as much as the excess capacity of the fleet,” the senior dry bulk analyst at a major London-based shipbroker told Splash. “Chartering demand from China is peaking. Coal prices are in crisis.”
Falling commodity prices have translated to delays in fixing ships as charterers wait for prices to firm, the analyst said.
There is little long-haul business and no port congestion to absorb excess tonnage from the fleet, so analysts says the downward trend will continue for the foreseeable future.
“Lay-up is not feasible these days,” the analyst continued. “Operators and Far East owners are obliged to fix whatever the rate.”
Demolition for dry bulk carriers was very limited in 2013, but January figures show that scrapping has been picking up. This activity will take many months to affect dry cargo markets overall, but will have no effect on the BDI as ships sold for scrap will be too old to be included in benchmark rates.
The BDI hit its third lowest level of 671 points in December 2008 when the banking crisis and resultant “credit crunch” meant that creditors could not service bills of lading.