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More dry bulk scrapping needed to avoid repeat of BDI all time low

More dry bulk scrapping needed to avoid repeat of BDI all time low
Precious Shipping warns that it dry bulk scrapping does not increase in the second half of the year owners could again be faced with the all time low rates seen in February.

In its second quarter newsletter Precious Shipping md Khalid Hashim noted that the Baltic Dry Index (BDI) had bounced back from the “misery” of 290 point in February to the “lofty” level of over 700 points in July (although it currently stands at 656 points). However, it was still extremely hard for owners to avoid negative cashflow unless they had extremely low operating costs.

Looking at the increase in the BDI in the first half of the year Hashim said that based on numbers from China in the period there were no reasons justify the current surge.

Instead the scrapping of 22.74m dwt of bulker tonnage in the first half, compared to 20.5m dwt in the same period in 2015, combined with virtually all newbuilding orders being delayed or converted to other ship types, had helped reduce pressure on the supply side resulting in a gradual rise of the BDI.

However, it was noted that scrapping had slowed to a crawl by the end of Q2 resulting in 0.84% fleet growth in the first half of the year when negative fleet growth had been expected based on Q1 scrapping numbers.

Hashim warned: “If scrapping doesn’t accelerate in the second half of this year then the BDI will start to drop from the current levels and we may be faced, once again, with rates that equal the all time low reached in February.”

The warning echoes that of Bimco at the start of June when it stated that zero fleet growth would be required over the next few years to bring dry bulk shipping back into profitability by 2019. Bimco president, Philippe Louis-Dreyfus said the industry needed to “demolish and enormous number of ships”.

Meanwhile, Precious Shipping reported a second quarter net loss of $13.48m compared to $12.03m in the same period in 2015.