The Baltic Dry Index tacked on 40 points on Monday. After just crossing the 900 point mark the index is now propelling towards 1000 points, a level where some resistance is expected. On Monday, the BDI reached 979 points.
Rise in BDI:
The Baltic Dry Index has soared in recent weeks as demand to ship goods into China increased following the conclusion of the Lunar New Year holiday. Capesize hire rates are seeing the steepest increases as iron ore shipping activity into China increases. Since bottoming in February, capesize hire rates have increased 80%. After this steep ascent, analysts are looking for range bound movement this week due to abundant cargoes while ship-owners will likely resist cutting their rates.
Increase in activity:
There is some optimism over rates for medium-sized ships with the season of grain shipments from South America approaching. Soybean harvest season should mean more cargoes to China, but the Brazil to China market has been quiet due to the seasonal rains. Shippers generally take this time to conduct seasonal maintenance – but this market should see an increase in activity, soon.
Steady charter rates:
Charter rates from Western Australia to China have been steady, at there is the sentiment that coal shipments from Australia to China will hold up now that China is likely to reintroduce stricter regulations on its coal miners. As domestic coal production drops, demand for imports will increase.
Demand for raw materials:
Demand from China for seaborne raw materials could experience a short-term setback as China moves to reduce pollution for China’s National People Congress meeting. Close attention will be paid to the outcome of that meeting to see if China boosts environmental protectionism. Tougher environmental regulations could reduce industrial output and that will in turn decrease raw material demand.
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Source: Economic Calendar
