(Montel) The Baltic Dry Index (BDI) rose 47% over the past four weeks to 529 points, the highest in four-months, as strong South American grain exports curbed vessel availability, according to industry sources on Monday.
The index – which tracks global dry freight rates – was up by 86% from its early February record low of 290 points, Baltic Exchange data showed.
“One of the major ingredients has been the South American grain season, with very large volumes of both corn and soya being loaded,” said Hans Gunnar Nåvik, analyst with Oslo-based consultancyNena.
The surge in loading activity had resulted in significant congestion at ports – particularly Brazil’s Paranagua, South America’s largest dry bulk port – thereby exacerbating already tight vessel availability, he said.
In response, the Baltic Panamax Index – a key component in the BDI – had more than doubled since early February’s record low of 282 points, to a latest assessment of 643 points.
Capesize response
The shortfall in 60,000-80,000 deadweight tonne (dwt) panamax vessels has had some knock-on effect on the larger 100,000-200,000dwt capesize segment.
The Baltic Capesize Index had nearly tripled since the end of last month, to 733 points.
“There are less panamaxes available for coal, resulting in more capesize vessels being used instead,” Nåvik said, noting there had also been some step-up in Chinese iron ore demand.
“There is a fair chance to see more room in the short-term [for further rate increases], but it’s hard to predict,” he said.
Brazil’s iron ore exports to China totalled 45.8m tonnes in the first quarter of the year, up 26% year on year, according to shipbroker SSY data.
At the same time, exports from Australia's most active iron ore port, Port Hedland, saw volumes to China increase by over 12% from the previous month, Hartland Shipping data showed.
Vessel supply
Meanwhile, there have been some efforts to lessen the overall glut in global vessel supply, participants said.
The BDI reached a record 11,793 points in May 2008 but the dry freight market has since been plagued by a severe glut of new-build vessels.
“In the face of slower raw material import demand from China and India, owners realised the only way to rebalance the market was to take the torch to chronic overcapacity,” Hartland Shipping analysts said in a note.
Around 14m dwt were scrapped in the first quarter, equating to 1.8% of total 776m-dwt dry bulk fleet capacity at the start of the year, they said. “A lot more needs to be done to return this sector to profitability, but are we finally seeing the green shoots of spring.”
Reporting by:
Laurence Walker
laurence@montel.no
14:48, Monday, 11 April 2016