The dry bulk market, particularly the Capesize segment, experienced a significant decline in rates during October. However, there are indications that this trend may reverse in the near future, reports Seatrade Maritime.
BDI Plunges
The Baltic Dry Index (BDI) has plunged by over 30% in October having ended September at 2,084 points. However, 29 October saw a small rise in the BDI to 1,402 points, up 1.45% on the previous day.
The drop in the dry bulk market as a whole in October was driven by the Capesize sector which saw spot rates losing over 50% over the course of the month from $30,000 a day at the end of September to $15,000 a day just four weeks later.
The smaller sizes fared better with Panamaxes down 20% during October, and smaller Supramax rates down just 6%.
The fall off in the dry bulk market in October was an unseasonal one in what is traditionally a strong quarter for the sector.
In its monthly dry bulk report analysts Maritime Strategies International (MSI) noted that the slump in the market could have been overdue. “Given the now longstanding weakness in one of the main underpinnings of the dry bulk market – Chinese steel production – perhaps it is more of a surprise that dry freight markets have been so strong till now.”
It noted that one of the main drivers for iron ore demand – Chinese steel output fell 10% in August and 6% in September year-on-year.
In its bi-weekly dry bulk shipping report Breakwave Advisors believes that the Capesize sector may now be about to turn around.
Sharp Reversal
“We believe the significant correction in spot Capesize rates that pushed the Index down some 50% in a month is now over. Seasonally, November represents a strong month for spot Capesize rates, and although the exact turning point is difficult to pinpoint, we believe any additional downside is limited, while the potential for a sharp reversal and a revisit of the 20,000 level before the end of the year is probable,” the report said.
As with MSI the analyst noted the fundamental weakness of the Chinese steel market as the cause of the recent slump but based its optimism in the last two months of the year on winter weather causing delays and inefficiencies in the Atlantic market and a historical rush by miners to ship more before year end.
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Source: Seatrade Maritime
