Baltic Dry Index Soars Due to Quake Factor!

Published on Bloomberg: Baltic Dry Index Advances to Record in London on Chinese Demand

• May 15 (Bloomberg) -- Commodity shipping rates jumped to a record on increasing Chinese demand for iron ore and may advance further as rising finance costs curb growth in shipbuilding.
  
  The Baltic Dry Index, a measure of costs to move everything from coal to grain, gained 418 points, or 3.9 percent, to 11,067 points on the Baltic Exchange in London.
  
  Chinese steel production has expanded more than fourfold in a decade, forcing the nation to step up imports of coal and iron ore from Australia and Brazil to feed its furnaces. The country, the world's most populous, is also the biggest consumer of metals including copper, nickel, zinc, tin and aluminum.
  
  ``The main thing is iron ore coming out of Brazil and Australia,'' Peter Norfolk, an analyst at London-based shipbroker Simpson, Spence & Young Ltd., said by phone today. ``Steel prices globally are very, very high so steel production is very strong, particularly in China.''
  
  China's steelmakers imported a record 42.9 million metric tons of iron ore in February, beating the previous all-time high set in April by 4.7 million tons, according to data from the China General Administration of Customs on Bloomberg. Stockpiles of the raw material, at 62 million tons, are also at a record.
  
  The delivery of as much as 10 percent of new ships faces delay or cancellation because of tighter credit markets and rising steel costs.
  
  ``There are not sufficient ships open in the Atlantic,'' David Webb, a director at London-based Arrow Chartering Ltd., said by telephone today. There are delays in China which ``are a new theme, a couple of days here and there. If that becomes a factor it would have a massive effect.''
  
  Congestion Worsening
  
  Simpson, Spence & Young's Norfolk also said congestion at Chinese ports is worsening.
  
  The loss or delay in deliveries of about 250 cargo ships, or 10 percent of orders, will tighten the supply of vessels and support rates when demand from China and India for everything from soybeans to coal has never been greater.
  
  The Bloomberg Dry Ships Index, which includes 12 shipping companies, has gained 75 percent in the past year, compared with a loss of 6 percent for the Standard & Poor's 500 Index. STX Pan Ocean Co., a Korean shipping company, and DryShips Inc., an Athens-based shipper, have more than doubled. The Baltic Dry Index has risen 65 percent in a year.
  
  Tighter credit, brought on by the $329 billion in writedowns by the world's banks and securities firms because of the collapsing mortgage markets, is taking a toll on the record level of ship orders that was expected to increase capacity and rein in rates. Costlier steel and the instability of less established shipyards are adding to the uncertainty.

Yup, it's at a record high. Dry bulk freight costs at record high. And note how them buggers at Goldman Sachs are fanning the fire!

• Freight costs for basic commodities such as iron ore, coal and grains surged to an all-time high on Friday, placing new inflation pressures on the countries such as China that import large amounts of natural resources.
  
  The Baltic Dry Index, the benchmark for dry bulk commodities' freight costs, rose to 11,459 points – a 3.5 per cent rise on the day – surpassing its previous peak of 11,039 points last November, boosted by a combination of strong demand for commodities and port traffic jams.
  
  It was the second successive day that shipping costs hit a record high and the index closed the week up 11.9 per cent. It has jumped tenfold since 2000.
  
  Analysts said demand for iron ore and coal was the main factor behind the jump but they also highlighted strong consumption of agricultural commodities.
  
  Crude oil prices ended the week by hitting a record high of close to $128, prior to the news that Saudi Arabia had pledged to increase oil production to its highest level in two years.
  
  The price rises were prompted by a bullish forecast from Goldman Sachs, the Wall Street investment bank, and fears that China would need to step up fuel consumption after the earthquake damaged its hydro-electric power plants.
  
  Nymex June West Texas Intermediate surged to a high of $127.82 a barrel, and later traded at $126.70 a barrel, up $2.58 on the day. That was a rise for the week of 2.3 per cent.
  
  Goldman Sachs said high oil prices would continue and told investors to buy long-dated futures for delivery in 2012.
  
  Its recommendation sent the December 2012 futures contract in New York to $123.96 a barrel, up $4.54 on the day. Adam Sieminski, chief energy economist at Deutsche Bank in Washington, said damage to hydro-electric facilities in China could prove to be critical for energy demand in the near term.
  
  "It is becoming clear that the earthquake has damaged as many as 17 dams in Sichuan where the earth quake occurred."

And remember me talking about Thorseen Thai, the dry bulk carrier from Thailand mentioned on posting Dryships, Maybulk and Dry Baltic Index (BDI) and Update on Dryships (DRYS) and Baltic Dry Index ? Well Thoresen Thai has reported that its profit surgeds on dry bulk boom!

• THORESEN Thai Agencies’ first-half profits leapt 90% on the back of the renewed dry bulk shipping boom. The Thai-listed handysize and handymax owner and operator reported a net profit for the six months ended March 31 of Baht4.81bn, 90.1% higher than in the same period a year earlier. The company reported first-half revenue of Baht16.2bn, up from Baht10bn a year earlier.

And the drybulks shares soared.

• NEW YORK (Associated Press) - Shares of drybulk shippers sailed higher Friday, as key index measuring drybulk ship activity blasted through an all-time high for the second consecutive day.
  
  The Baltic Dry Index, which measures drybulk shipping rates on 40 routes across the world, leaped 392 points Friday to close at 11,459. The index made its biggest jump ever _ 443 points _ just a day earlier and eclipsed a previous all-time high of 11,039 set in mid-November. The index is managed by the Baltic Exchange in London.
  
  Among the largest gainers were Excel Maritime Carriers Ltd., which rose $4.18, or 7.8 percent, to $57.72; and Euroseas Ltd., which added $1.30, or 8.4 percent, to $16.80.
  
  Drybulk ships have been in high demand as China and emerging nations import massive cargos of iron ore and coal to make steel, and require cement, construction and agricultural products.
  
  But demand was slowed in the first quarter by iron ore price negotiations in China and flooding that led to coal production slowdowns in Australia and South Africa.
  Jefferies analyst Douglas Mavrinac said the index's two-day surge can be attributed to the ramp-up of iron ore production in Australia, as well as an "emotional" response to the massive earthquake earlier this week in China.
  
  Mavrinac said that some speculation is brewing that the damage from the earthquake may require the Chinese to import more agricultural products to account for damaged crops, and construction materials as the rebuilding process begins.
  
  "It's adding a little bit of tightness to an already tight market," he said.
  
  Other gainers were DryShips Inc., which leaped $4.24, or 4 percent, to close at $110.74, and Diana Shipping Inc., which added $2.40, or 6.6 percent, to $39.

Dryships gained some 4% to $110.74!

The price movement of Dryships is certainly most impressive. Here is the recent 5 day movement of the stock.

And if I zoom out and look at its one month performance, it's even more impressive!

And even our local bulk carrier is showing some sign of life! Yeah no joke!

How?

Do you still trust your reasonings?

Do you think that trust is a must?