Baltic Exchange’s Dry Bulk Sea Freight Index Rises to One Month High with Capesize index Up 50% This Week.

The Baltic Exchange’s dry bulk sea freight index was lower this week hampered by the Lunar New Year holiday through Asia. The BDI was already hampered by downward pressure on rates from weak shipping demand. China’s crude steel production according to the World Steel Association, output for 2021 fell for the first time in six years. China is the world’s largest consumer of iron ore. Its iron ore imports fell for the first time in three years, according to customs authorities. Additionally iron ore shipping has been interrupted by heavy rain in Brazil.

Panamax Vessel

Baltic Exchange Dry Index (BDI) Segments (Feb 11, 2022)

  • The Baltic Exchange’s dry bulk sea freight index rose for a fourth straight session Friday with its biggest weekly gain since June 2021, supported by strong demand across vessel segments.
  • The BDI rose 37 points, or 1.9%, to 1,977, its highest level since Jan. 12, rising nearly 39% this week.
  • The capesize index eased 47 points, or 2.5%, to 1,857 but gained nearly 50% this week.
  • Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, fell by $392 to $15,397.
  • The panamax index gained 70 points, or 3%, to 2,403.
  • Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, rose by $625 to $21,623.
  • The supramax index climbed 101 points to 2,158. 

BDI Feb 11, 2022

Factors influencing Freight right now

  • China’s December iron ore imports had slumped 18% month-on-month to 86.07 million tonnes, sending its annual purchase to 1.12 billion tonnes in 2021, down from the record high a year earlier, customs data showed.
  • Heavy rains have pounded the mining region of Minas Gerais state in southeast Brazil relentlessly for the past three weeks,
  • French steel pipe maker Vallourec has suspended mining operations in Pau Branco.
  • Omicron uncertainty

Randy Giveans, vice-president, equity research, at Jefferies. commented on the current price situation;

“This is normal seasonal softness going into mid to late January throughout February, the biggest reason is Chinese New Year. This year we need to add on Beijing Winter Olympics and weather disruptions in Brazil. The near-term outlook is certainly going to be weak and then we think there will be some pent-up demand that boosts rates in late February into March and April.”

Port Delays

  • “Most of the prompt tonnage that has been heading towards the South Atlantic is now covered. This together with more fresh cargo has changed the sentiment and boosted the index,” shipbroker Fearnleys said in a weekly note, referring to the capesize segment.
  • “However, the most interesting this week has been the significant increase in period demand and the willingness to pay up. For the coming week it looks very promising.”
  • Delays at ports along the U.S. West Coast have also increased, Oakland at over 10 days in January from around five in December, according to project44 data. Delays at Los Angeles stayed around six days in December and January.
  • Ports have tried to extend working times to clear backlogs and companies have sought to shorten delivery routes and diversify goods suppliers to alleviate delays.
  • Leading container group A.P. Moller-Maersk told its customers last month it was struggling to move goods around the world.

The Baltic Dry Index (BDI) is a composite of the dry bulk timecharter averages and provides a continuous time series since 1985. The BDI is a composite of and factors in rates for Capesize, Panamax and Supramax Timecharter Averages. It is reported around the world as a proxy for dry bulk shipping stocks as well as a general shipping market bellwether.

  • Baltic Capesize Index (40%)
  • Baltic Panamax Index (30%) 
  • Baltic Supramax Index (30%) 

There a number of negative catalysts stemming from the climate and supply crisis stifling demand. While we are seeing easing congestion at Chinese ports and thin coal cargo flows out of the Pacific are weighing on capesizes. Steel futures prices in China jumped, with hot-rolled coils and construction rebar climbing more than 4% in intraday trade to narrow the gap with spot prices, as traders cheered a marginal improvement in consumption of industrial metals.

With China striving to ease it’s energy crisis by limiting steel production to limit industrial power usage portside inventory of iron ore has swollen to the highest level in 31 months. China is the world’s top steel producer and their restrictions have crushed demand. for iron ore.

What are the Baltic indices?

From The Baltic Exchange

The Baltic indices are based on assessments of the cost of transporting various bulk cargoes, both wet (eg crude oil and oil products),dry (eg coal and iron ore), gas (LNG and LPG) made by leading shipbroking houses located around the world on a per tonne and daily hire basis. The information is collated and published by the Baltic Exchange. We also provide daily container market assessments in collaboration with Freightos and a weekly air freight index as well as assessments on vessel operating costs, Sale & Purchase and vessel recycling prices. 

The principal dry cargo indices are: the Baltic Exchange Capesize Index (BCI); Baltic Exchange Panamax Index (BPI);  the Baltic Exchange Supramax Index (BSI); and the Baltic Exchange Handysize index (BHSI). The Baltic Exchange Dry Index (BDI) is calculated by taking the timecharter components of the Baltic’s capesize, panamax and supramax indices. 

The Baltic Exchange International Tanker Routes (BITR) reports on international oil routes and makes up the Baltic Exchange Dirty Tanker Index (BDTI) and the Baltic Exchange Clean Tanker Index (BCTI). 

We cover the gas markets through our LNG (BLNG) and LPG (BLPG) assessments. 

Shipping investors are able to assess the health of vessel earnings through our quarterly operating expenses assessments, as well as our weekly Sale & Purchase and Recycling assessments. 

Forward curves for all listed freight contracts are also published on a daily basis.

Source: The Baltic Exchange Reuters

From The TradersCommunity US Research Desk