Baltic Dry Index Crash: Who Would Be Hurting?

The Baltic Dry Index has continued its free fall.

Here's the closing Baltic Indices.

• Baltic Indices
  
  Baltic Dry 1,840 (-3.26%)
  Baltic Capesize 1,949 (-7.28%)
  Baltic Panamax 1,941 (-0.15%)
  Baltic Supramax 1,789 (-1.54%)
  Baltic Handysize 988 (-1.50%)
  As of 07/12/10
  
  Baltic Dirty Tanker 789 (-0.88%)
  Baltic Clean Tanker 812 (-0.12%)
  As of 07/12/10

The lack of demand for iron core and coal is clearly highlighted by the massive plunge in the Baltic Capesize Index. ( Capesizes usually haul the 150,000 tonne cargo such as iron core and coal)

The comparison YTD performance between Capesize and Dry Index.


No demand for iron core equals no demand for shipping!

• Commodity Shipping Slumps for Longest in 9 Years on China Steel
  
  The Baltic Dry Index, a measure of commodity shipping costs, fell for the longest period in almost nine years as declining Chinese steel prices erode the nation’s iron ore demand.
  
  The index of freight rates on international trade routes fell 38 points, or 2 percent, to 1,902 points today, according to the London-based Baltic Exchange. Today’s drop was the 31st straight decline. That’s the longest since the 34 sessions to Aug. 15, 2001, according to Baltic Exchange prices. Charter rates for all types of ships tracked by the exchange fell.
  
  “We don’t see anything in the next two to three weeks that’s going to turn the market around,” Guy Campbell, head of dry bulk at Clarkson Plc, the world’s largest shipbroker, said by phone. “Everything is centered on China. We are still watching China in terms of where the steel price is going.”
  
  The price of hot-rolled steel in China has declined 17 percent to 3,909 yuan ($577) a metric ton since rising to a 2010 high of 4,698 yuan on April 15, according to prices from Antaike Information Development. Some of the nation’s mills are shuttering blast furnaces for maintenance and others are relying on existing stockpiles instead of imports, Michael Gaylard, strategic director at Freight Investor Services Ltd., said by phone from Shanghai today.
  
  Iron ore creates the single-biggest source of demand for dry-bulk shipping, according to data from Clarkson’s research unit. Trade in the steelmaking ingredient will total 996 million tons this year. Coal is second-largest at 865 million tons of seaborne trade. Grains are 315 million tons. ( source: here )

Recent postings on the current plunge..

• Baltic Dry Index Plunges But Container Rates Soars!
• Baltic Dirty Tanker Index And Baltic Dry Index Plunging.. What Does It Mean?
• Baltic Dry Index Continues To Plunge
• Time To Panic? BDI Down Over 40% In 20 Days! (June 24th )
• Baltic Dry Index Continues To Plunge! Are You Worried About the Possible Implications?
• Plunging Baltic Dry Index Reflects The Slowing China Commodity Demand

If we take Guy Campbell, head of dry bulk at Clarkson Plc, the world’s largest shipbroker, comments into consideration, that is, “We don’t see anything in the next two to three weeks that’s going to turn the market around,” then shouldn't we be concerned with the impact on the shippers. Surely idle ships for the next two to three weeks will not do any dry bulk shipper any good.

Posted on 13th May 2010, Baltic Dry Index Recovers An Impressive 45% And Offers A Ray Of Hope To The Greek Economy?

Now according to this Bloomberg news article, Greek Shipowners Waiting for Prices to Drop, RBS Says, Greece shipowners accounts for more vassels orders! And the longer the plunge its most likely RBS could be hurt also!

• The ratio of losses on RBS’s shipping loans has averaged 2 basis points, or 0.02 percent, in the past 20 years, according to Varnavides, who joined the bank’s shipping department in August 1974. He said he expects that trend to continue for the next several years. The bank’s shipping department is expanding lending, while the unit’s so-called non-core shipping lending has dropped, he said.
  
  RBS has provided about $23 billion of credit to shippers, of which $20 billion has actually been borrowed, he said. In January last year, it had provided $25 billion of credit.

And the biggest Greece shipowner is Dryship and the strange thing was Dryship was downgraded last month, DryShips Stock Earns Downgrade‎ and the downgrade was not based on dry bulk shipping but was based on its offshore oil deepwater drilling rigs!

Here's how Dryships is doing.



Not a bad or scary looking chart if you look at it from a 6 month's perspective but take a look at how Dryships had performed the past 3 years. It's a shocker...


Yup this stock once traded above 110. It's now less than 4 bucks! ( Blogged on Dryships back in 2008: Dryships, Maybulk and Dry Baltic Index (BDI) )

ps: Here's a screenshot of summary of ship sales...

Read more...

Update on Dryships (DRYS) and Baltic Dry Index

The Baltic Dry Index has soared another 2.849% to close at 10,649!!!

And Dryships has continued to perform.




Here is an article from UK Guardian, Baltic capesize sea index hits record on China ore

• By Stefano Ambrogi
  
  LONDON, May 14 (Reuters) - The Baltic Exchange's capesize freight index for merchant ships hauling minerals worldwide soared to a record on Wednesday on sizzling demand for iron ore into China and increased global coal demand.
  
  Sea freight markets for natural resources have largely been impervious to the turmoil sweeping financial markets and a weakening U.S. economy, buoyed instead by the rapid industrialisation of China and India.
  
  The capesize index <.BACI>, monitoring costs for classes of merchant ship typically hauling 150,000-tonne cargoes of minerals, soared 588 points, or 3.7 percent, to a record 16,357 points, surpassing the previous all-time high struck in November last year.
  
  "China's iron imports in April were at a new record and they are enormous -- they are almost 5 million tonnes higher than the previous record month, which is a huge rise," said Peter Norfolk, a senior dry commodities analyst at consultancy Simpson, Spence & Young.
  
  "We are also seeing a lot of coal activity, which is positive for tonne-mile demand, and U.S. coal exports have made a strong start to the year, making up for shortfalls in supply elsewhere, especially in the Pacific," Norfolk said.
  
  "Everything (fundamentals) is still booming," he said pinning the main driving force for the spectacular rise on raw materials demand from China.
  
  "Demand for all these commodities is broad based, steel prices are strong everywhere, but in volume terms it is still China," he said.
  
  Jim Lennon, a commodities analyst at Macquarie Bank who monitors freight markets, said the record clearly showed demand for natural resources had not been dented by the credit crisis or economic worries in the West.
  
  "What it tells you is that China is still booming, which is what we always thought, and that India is requiring a lot more coal -- the shipping of commodities does not really reflect the U.S. (downturn) at all," he said.
  
  "What it says is that there is onging demand and the world economy is growing reasonably strongly and it's more a question of congestion and a lack of ships being built than anything else," Lennon said.
  
  Citing ship industry sources, Lennon said costs could climb even higher this year due to congestion at key export terminals in Brazil and Australia and higher projections of iron ore and coal supplies.
  
  "There is just a huge amount of new iron ore to be shipped and so there is a real scramble. They (sources) are predicting it is going to blow out, it could go up another 20 to 30 percent," he said.
  
  Other key Baltic indices are also close to records on robust demand for natural resources.
  
  The Baltic Exchange's chief sea freight index <.BADI>, which monitors 40 major trade routes for minerals, grains, cement and sugar, jumped on Tuesday, closing rapidly on an all-time high struck last November.
  
  Prices have recovered strongly after a near collapse at the start of the year on short-term logistical disruptions to commodity supplies.
  
  Freight costs on key export routes are more than 10 times higher than the economic crisis of 2001-2002, when the dot-com bubble burst and the Sept. 11 attacks hit world trade.

They predict that index to move up another 20 to 30 percent??!!

WOW!

And even Thoresen Thai is performing rather well.

All except Maybulk!

LOL!

Why oh why?

Read more...

Dryships, Maybulk and Dry Baltic Index (BDI)

January 8th 2008.

That was when I was blogged on the Baltic Dry Index: Regarding the Dry Bulk Shipping Sector

One of the stock that was featured by Ms.Teresa Lo, from Invivoanayltics.com (see dry bulk shipping industry ) was DryShips.

A month later, I had made another update. Update on Baltic Dry Index

• Since the Baltic Dry Index has recorded some decent recovery (see most recent quotes above), I only think that it's appropriate that I also make an update on my past BDI postings ( Regarding the Dry Bulk Shipping Sector., Maybulk And The Baltic Index and Another update on Maybulk ).

And by March 8th, I had posted yet another update. Do They Know It's Christmas Time for ...

• Yes, since hitting the peak, the index for the Baltic Dry Index had tumbled. And as stated precisely, cargo shipments were indeed impacted by bad weather condition (severe snow storms in China to be precise) and this had put a huge damper in the charter rates. However, at this moment of time, this has clearly passed. The charter rates had certainly rebounded extremely strongly and as can seen above, the BDI closed at 8536.
  
  Yes, the plunge of the BDI from 11k has spooked the shipping shares. The index fell to a low of a 5615 on Jan 29th 2008.
  
  But the BDI is now at 8536!
  
  Oh, that's a recovery of some 2921 points or a whopping 52% from its Jan 29th lows!
  
  How?
  
  Do you reckon that Maybulk, whose earnings depending heavily on the index, should rate much higher?
  
  Ah yes, if you read Maybulk's earnings, there's a proposed 30 sen dividend. And if you use historical fiscal years as an indicator, Maybulk's dividend should go ex in April and payment would be made in May.

And here is latest update for the BDI.

Yes the BDI is now 10,354 pts! Which means the BDI has recovered an incredible 84% since its lows in January 2008.

And the following shows the trylu amazing recovery of the Index.

Why the sudden spike in this Baltic Dry Index? (Note this is just an index and it's not a tradeable thingee!)

The following Bloomberg News article offered some clues: Shipbuilding Torpedoed by Subprime Causes Cost Surge

• ``Cancellations would certainly be bullish for rates because the ships won't be there,'' Natasha Boyden, an analyst at Cantor Fitzgerald in New York, said.


• Freight rates have risen as fewer vessels have been delivered. The Baltic Dry Index, a measure of rates, has risen 58 percent in the last year as an index tracking the number of cargo ships under construction has fallen 21 percent in that time, using Lloyd's Registry Fairplay data.

And other shipping giant such as Mitsui OSk is feeling really bullish. Mitsui O.S.K. to Beat Profit Forecast on Higher Rates

• Mitsui O.S.K is benefiting from China's demand for iron ore as the country builds more cars, ships and factories. China's economy grew at the fastest pace in more than a decade last year and the country's imports of iron ore jumped 17 percent, the China Metallurgical Mining Enterprise Association said in April.
  
  ``Given the increase in rates, it wouldn't be unusual to see profits come in higher than forecast,'' said Osuke Itazaki, an analyst in Tokyo at Credit Suisse Group.
  
  Mitsui O.S.K rents 22 of its 100 large so-called ``capesize'' vessels at daily rates. It can quickly raise prices for those ships in response to fluctuations in demand. The other ships are contracted out for longer periods with fixed rates.
  
  The Baltic Dry Index, a measure of commodity-shipping rates, last week rose to the highest this year. It rose 53 percent to 10,220 in the past 12 months and touched a record 11,039 in November.
  
  `Strongest' in History
  
  ``The strongest dry-bulk commodities market in history is extending this run of higher prices,'' said Yonetani. ``Operating profit is likely to exceed our expectations.''
  
  The company plans to add 53 iron-ore carrying ships to its fleet over the next six years, it said today in a statement. Mitsui O.S.K. currently operates 125 such ships and plans to retire some of the older vessels. It had 364 bulk commodity ships in its fleet at the end of March.

And over in Thailand, folks are getting bullish on Brokers bullish on Thoresen Thai (note this a current news!)

• Given the level of the Baltic Dry Index - now above 10,000 points for the first time since December - and strong demand for dry bulk shipping, most brokers have recommended "buy" on Thoresen Thai Agencies' stock.
  
  Of 20 brokers in the Securities Analysts Association's consensus, 14 brokers recommend "piling up" TTA's stock, four brokers recommend "trading buy", while one each advises" hold" and "sell". The target price in the consensus ranges between Bt48.50 and Bt79 per share.
  
  TTA is Thailand's largest dry bulk shipper, owning 45 general cargo vessels and bulk carriers as at the end of last year. It has expanded into offshore oil and gas-related services through its subsidiary, Mermaid Maritime, which owns four offshore supply and support vessels and two tender drilling rigs.

Now let's our leading dry bulk carrier stock, Maybulk Carriers.

Firstly, the chart had been adjusted to account for the 30 sen dividend that was paid in late April.

Maybulk last traded at 4.26 and if you use the January low of 3.50 as the low, the stock had appreciated some 76 sen. Adding back the 30 sen dividend, this would mean that the stock has appreciated by some 30%.

Now let's compare Maybulk's performance to Dryships performance.

Back on Jan Dryships was trading at 52.18. It closed at 98.40 yesterday. Dryships has increased by a whopping 88.5%! (Which is about correct when one consider that BDI had increased some 84%) ( Dryships was also blogged by Chris Perruna,DryShips (DRYS) Drying up?. )

The below chart shows the incredible disconnect between Maybulk's performance and Dryships performance.

So why is Maybulk so under performing?

Is there something wrong with Maybulk?

Why is Maybulk being ignored by our local market?

How now my dearest MooMooCow?

Read more...