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Slight rise in Baltic Dry Index but bulk market forecasts remain bleak

Slight rise in Baltic Dry Index but bulk market forecasts remain bleak

London: The Baltic Dry Index (BDI) rose by 11 points yesterday, marking the first reversal in the downward spiral it has faced since September. The Panamax index led the pack of an otherwise losing market, rising 93 points, following another rise posted on Tuesday, which could be an indication of life for the dry bulk market writes Hellenic Shipping News. Nevertheless, all other indexes kept their downward trends, with the capesize index moving further down by 26 points at a total of 1,185 points. If the decline had continued at the pace set during the previous weeks, the BDI was on track to hit an all-time low in less than a fortnight, beating the record of 554 points set twenty years ago.

Fearnley's latest report released yesterday left little room for optimism though, but it tracks what happened in the market until the beginning of this week. The broker stated that there is "still no light at the end of the tunnel".

Commenting on the capesize sector which is deemed as the benchmark for the sector, Fearnley's said that even though Vale has withdrawn their demand for a price increase the financial markets are still not working. "This has caused a total lack of activity with contracted cargoes being washed out rather than performed. As the numbers of spot vessels are increasing and as indexes continue to fall, faith in a recovery has all but disappeared. A few 12 month period fixtures have been concluded, but these seem only to form part of a fleet renewal process rather than a belief in a market recovery. This week the market seems more interested in what happens with the FFA settlement and the potential fall out related to this" the broker said.

Earlier on Barry Rogliano Salles had stated that widespread reports of production cuts by Chinese steel mills were finally followed this week by the first major pullback in ore production. Vale will reduce its output by 10% in response to what it calculates as
a 20% reduction in worldwide steel output. Ore stockpiles meanwhile remain high in China, with totals actually rising a fraction over the last seven days.

More importantly, ship owners are being squeezed on all sides with rising insurance costs, loss-making bunker hedges and the falling creditworthiness of charter partners adding to their rate woes.  [06/11/08]