During the week, the Baltic Dry Index (BDI) slipped again, retreating to the 1,000-mark after November’s rally 2016. On Wednesday, the BDI stood at 1,003 points, after a drop of 49 points day-on-day bringing it close to the similar level at early November.
The slip-up has been aggravated by slowing demand for larger vessels with capesizes starting the week at $8,181 before slipping by almost 24% to $6,231 on Wednesday.
“Tonnage has been thin and the weather issues in North China made up a very gloomy day for big ships,” commented an FIS FFA broker.
Similarly, strong demand from China for iron ore also slowed, with steel mills finding spot iron ore priced above the $80 per tonne mark too high for their liking. Thus, many mills decided to wait a for price correction before restocking cargoes for the early Lunar New Year which occurrs at the end of January 2017.
In fact, the slow down for freight rates has been long-expected as the winter months approached. Owners had pinned their hopes for an upturn on China’s imports of thermal coal, as heating demand improved in the cold season. So far, their hopes have yet to translate into financial gains with the exception of smaller vessels which saw gradual gains throughout the week.
“With reports showing a firm Atlantic but weakening Pacific, the market pushed early on Q1 2017,” said an FIS supramax FFA broker.
Since the start of the week, supramax rates progressed steadily from $10,123 to $10,198 by Wednesday, while handysize rates increased from $8,177 on Monday to $8,393 by mid-week.
When the weather is cold and wet, a few slip-ups are to be expected, but unfortunately they put grease on the wheels of a freight rate recovery. But perhaps we should keep the faith, after all, freight rates have come so far simply by living on a prayer and making ends meet. Though the final destination of freight market may not be a bed of roses, it will is sure to have gone out in a blaze of glory compared to the depths of the lull at the start of this year.
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