London: The dry bulk market has seen a strong start to the week, with the Baltic Dry Index closing at 803 points yesterday, up by 39 points. This has given the market a surge of optimism as it continues a strengthening of rates first seen last week.
Leading the pack was the Capesize sector, which shot up by another 123 points or 10%, to end at 1454 points, writes Hellenic Shipping News, while the Panamax index managed to turn to positive for the first time in more than two weeks. Panamaxes closed at 450 points, up by 10 points. The website quotes Dahlman Rose as having said that the Capesize market continued to outperform smaller ships, with spot activity heavily concentrated out of Australia. Average Capesize rates are nearing the $10,000/day level and stand at the highest level since late October.
"Major Australian miners, most notably BHP and Rio Tinto, were the leading players in the market, driving spot Capesize rates up towards two-month highs. Indications are that miners have been selling more iron ore on the spot market, less expensive to steel producers than tonnage at contracted prices" Dahlman Rose is reported to have said.
On a similar page, Barry Rogliano Salles (BRS)'s weekly report on the dry bulk market also indicated that "up-tick in demand appears to have been driven mainly by small and medium-sized Chinese mills keen to take advantage of low spot freight and ore prices. India's recent decision to lower or abolish taxes on ore exports has also increased its competitiveness".
Of course, despite the positive trend highlighted during these past few days, dry bulk shipping companies aren't yet in the clear. On the contrary, they keep facing serious challenges. "Rates have not achieved a level to add support to vessel values, and loan/value covenants likely remain in jeopardy," said Dahlman. BRS noted that "the China Metallurgical Mines Association last week confirmed that China's domestically produced and imported ore reached 632m tonnes between January and September - still 64m tonnes more than the country's steel sector required.
The big question is if the capesize sector will continue its resilience. According to BRS, already, the average of the four time charters did even better, rising from $2,763/day to $8,261. Owners could even hope to cover their operating costs with such rates. In the period market, there were reports of at least one twelve-month fixture at $17,500/day. [16/12/08]
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