Baltic Dry Index – How Low Can It Go & How Long Can It Last?

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How Low? :

The Baltic Dry Index ended Friday 29 January at 317, which is never been seen before level.

Recent deals suggest that shipowners are not collecting enough money to pay for the running of the ship.  Hence it suggests that the index has hit the rock bottom.

Since it is now below the cost of operating a vessel it may not go further below.

Demand boosting Factors that decide “How Long?”:

  • China, as the big consumer, has slowed down imports.
  • Given the size of the present fleet and the number of ships on order, this year’s ship supply is high and demand from the shippers is low.  This suggests no improvement for industry for this year.
  • Chinese government may restructure  iron ore and coal industry.
  • Chinese government  has to grow other parts of the economy to counter balance for jobs lost in the coal and steel industries.

Source: Seeking Alpha

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