The Baltic Dry Index may experience a quiet week, with activity calming ahead of a long weekend in many countries. The upcoming weekend is the final long weekend of summer in the Northern Hemisphere, and many businesses will close.
While this could mean a quiet week for the BDI, at the same time, the shipping sector remains well supported by continued demand from China for raw materials, with the BDI’s recent winning streak being powered by a rally in capesize hire rates. Capesize ships have been in high demand to transport iron ore to China, and now, other ships could see their demand really pick up, and that could propel the BDI even higher as summer winds down.
While all BDI component ships have been benefiting from increased demand, the capes have led the way and now panamax ship demand should increase in about a month as harvest season gets underway. Also to note, paper supramax rates have recently broken resistance, and this could trigger a rally in the physical market.
But, when winter comes there are concerns that the BDI could experience a bit of a correction. The recent capesize rally has been built on China’s big appetite for iron ore before the country curbs industrial output in the winter. Once the country’s output of steel is officially cut back this will mean little demand for more iron ore, while at the same time China will have lots of iron ore sitting at its ports to work through before it needs to replenish its supplies.
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Source: Economic Calendar
