Dry Bulk Weekly – 21 March, 2010
Baltic dry index fell 3.6% in the last week due to massive 18.6% drop in Capesize Index. Panamax, Supramax and Handysize Index ended all in positive territory.
The Capesize Index fell due to increased supply of available vessels which outnumbered the also increased number of cargoes needed to be transported and due to capsize/panamax substitution (it takes two panamaxes to ship one capsize cargo).
Looks like the largest world iron ore producer Brazilian Vale is determinate to price its ore on spot markets. The year price fixing will probably become a thing of the past starting from this year. Various reports (mostly from Japanese steal makers) confirm that the iron ore producers demanded price increase for this year is 90%. If it is carried through, it could negatively affect both iron ore volumes, coal volumes and steel output. Needless to say marine transport would share part of the pain.
The iron ore stockpiles in Chinese ports, on the other hand, are at the highest level in six months. This is somewhat normal as Chinese steal makers increase stocks before iron ore price negotiations to straighten their barganing position. The disturbing thing is that China steel stockpiles (all dough they fell first time in almost five months) are incredibly high.
Second hand ship prices reached a 18 month high; activity moving from old ships to newer build ones. The bulk of demand comes from Asian buyers.
Chart 1. Baltic Dry Indexes Relative Performance
Source: Bloomberg
Chart 2. Baltic Dry Index
Source: Bloomberg
Chart 3. Baltic Dry Index Components
Source: Bloomberg