Markets show more instability

Markets show more instability
Published: 23 January 2008

Another frenetic week in the dry bulk market with more huge fluctuations in rates and plenty of drama behind the scenes. The Baltic Dry Index (BDI) finished ast Friday at  6462, down nearly 1500 on the week and its lowest level since July last  year. However by the end of the week there were signs of a major rebound in  the Forward Freight (FFA) market sector and for larger tonnage sizes rates seem to be holding up suggesting the present tirmoil might be short-lived.

Meanwhile long-term purchasing commitments were inevitably being delayed while talks for the 2008 iron ore prices continued. With financier Credit Suisse predicting a possible 25Mt shortfall in iron ore supplies in 2008, which it says could result in price increases of up to 70%, there is considerable uncertainty for buyers.

All four Panamax routes dropped  substantially last week, the four timecharter routes gave up a total of  US$7,048 per day at the close and the BPI lost 864 points by the end of the  week. With very little fresh cargo enquiry emerging, the number of spot  ships increased and rates in both basins continued to succumb to the pressure. In the Atlantic the continued lack of Brazilian iron ore cargo, and the problems at the Baltimore Consol terminal, saw more Panamax vessels seeking out cargo opportunities. The Pacific however took the biggest  beating losing a total of US$8,583 per day over the week.

Last week the Handy/Supramax markets lost considerable ground. Mainly driven by an oversupply of ships in the Pacific and the Med basins, the average Handysize timecharter rate fell US$3,000 to finish the week at US$37,300 per day, while for the Supramaxes the average lost US$7,000 to reach US$47,500 per day. Owners had to make the most aggressive offers to flee the Pacific basin (a 45,000 dwt vessel built 1996 was fixed at US$26,000 per day for a trip from Taiwan to West Africa), and join the Atlantic where a 50,000 tonner was fixed at US$78,000 per day for a trip USGulf /Far East. The trend appears soft for the immediate term, and brokers feel confidence starting to waver on the longer term horizon.