Sunday, October 4, 2009

Baltic Dry Index set to surge

The Baltic Dry Index (BDI) may hit 4,000 points in the current quarter, propelled by increasing demand for iron ore and grains from China, analysts say.

The BDI, a measure of shipping costs for commodities, rose 5.6% to 2,284 points on Oct 1 from 2,163 on Sept 24.

The highest level it reached this year was 4,291 points on June 3.

An analyst with a local research house told StarBiz that he expected the BDI to jump to more than 4,000 points in the current quarter as iron-ore demand from China was forecast to increase due to a pick-up in construction activities there.

“This was because most construction works were slow in the third quarter owing to hot weather, which is quite common especially in southern China,” he said. “Now, the weather has cooled which is more conducive for construction works to resume.”

The analyst added that the cold weather also prompted more coal to be exported to China.

Bloomberg reported China Ocean Shipping (Group) Co as saying the BDI might surge more than 80% by the year-end on increased demand from China.

And a report posted on said China’s steel makers were buying more iron ore as the government had implemented a US$586bil stimulus package to revive growth.

“China’s economy is forecast to expand 8.2% this year, compared with the March estimate of 7%,” it said.

Iron ore is the largest dry-bulk cargo moved by sea and China is a major consumer of the commodity.

Furthermore, the analyst said bumper crop harvesting such as wheat and corn in the United States would also contribute to the rise in the index.

“This is because the bumper harvesting will drive grain prices down where it is expected to create demand,” he said.

The positive BDI outlook augur well for Malaysian Bulk Carriers Bhd (Maybulk), Kenanga Research said, noting that the shipper had agreed to acquire a 3½-year vessel of 32,000 deadweight tonne, Ikan Juara, for US$23.75mil.

“The group’s current fleet will expand to 13 after the addition of Ikan Juara,” the brokerage said in an update report.

Source: StarOnline

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