Dry bulk market shows signs of recovery
Last year, the Baltic Dry Index (BDI), the barometer of shipping cost for commodities, fell 93.4% from its peak of 11,793 points on May 20 to 774 points on Dec 24.
From its lowest point of 663 points on Dec 5, the BDI had shown marginal increase of 26.1% to 836 points on Dec 17.
This was then supported by the sentiment of iron ore demand. China, the world’s biggest steelmaker, imported 32.5 million tonnes of iron ore in November, up 6.2% from October.
Some experts predicted that the dry bulk rates were likely to recover this year when China replenished its dwindling iron-ore inventory and demand for thermal coal started to pick up.
According to TA Securities’ latest Malaysian Bulk Carriers Bhd (Maybulk) update, China’s iron ore inventory was still stalling at around 70 million tonnes while steel production and iron ore imports were in a downward trend.
Maybulk is the biggest dry bulk shipping company in the country.
“It is reported that Chinese steel companies are seeking to change the commencement of the iron ore term contract for this year, as prices of the steel-making raw materials dropped sharply in recent months,” said the report.
China would usually conduct price negotiations with the top three iron ore producers - BHP, Vale and Rio Tinto - in April every year.
The report said if the negotiation was successful, it would give short-term positive sentiment that would help revive the collapsed dry bulk freight market as steel mills could buy raw materials at more favourable prices.
“This will in turn benefit the dry bulk shipping companies such as Maybulk,” it said.
Meanwhile, the report said the International Energy Agency (IEA), in its latest monthly report, indicated that China’s exports were expected to slow down as its main export markets in Europe and the US were expected to slow sharply this year.
“Nonetheless, we believe the stimulus plan of 4 trillion renminbi announced by the Chinese government to revive the economic growth might cushion the poor condition in the long run,” it said.
Source : thestar
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