BDI seen to average 2,000 points this year

THE Baltic Dry Index (BDI), the benchmark for commodity shipping rates, is expected to average around 2,000 points this year, based on upswing in demand from the world’s major raw material importer, China.

According to an industry analyst from a local research house, the movement of the index is usually influenced by iron ore and coal shipping, especially to China.

Bloomberg reported coal imports to China rose 36% from a year earlier in March. The country shipped in a record 53.5 million tonnes of iron ore last month.

Coal and iron ore account for almost 50% of commodities shipped on dry-bulk vessels. The dry-bulk vessels currently make up almost 40% of the world’s merchant fleet.

“I expect the index to continue fluctuating for the rest of the year, averaging around 2,000 points for 2009,” he told StarBiz.

On whether the average 2,000 points will provide a healthy margin for dry-bulk vessel owners, he said it would depend on the initial cost of the ships, which was also highly fluctuating according to demand.

The BDI rose to 2,194 points on May 7, closer to its peak so far this year at 2,298 point on March 10.

The index has been steadily rising since April 29, advancing by 23.8% to 2,194 points on May 7.

The lowest level this year was recorded on Jan 5 at 772 points.

On the stability of the index amid the global financial crisis this year, the analyst said the prospects for dry-bulk market was still weak due to imbalance in supply and demand growth.

“The global dry-bulk fleet as at end of last year was about 400 million dead-weight tonnes (dwt) and Platou, a ship broker firm, forecasts the scrapping of 20 to 30 million dwt this year, equivalent to 5% to 7.5% of the global fleet.

“But the ship brokerage also forecast about 55 million dwt in new deliveries this year, on the assumption that 25% of 2009 deliveries will be delayed.

“This translates into a 6% net fleet growth in comparison with negative demand growth in the global recession. I would say the prospect for dry bulk is still pretty fragile,” he said.

Source: StarBiz