Dry Bulk Market Analysis-May

توسطAli Karim 1 سالپیش

Throughout the first 5 months of 2018, dry bulk market was very volatile. However, Despite a weak start, a speedy surge in rates began after early-April. BDI fell as low as 948 (in April 6, 2018) and has taken a path to above-deck prices -although there has been some fall downs now and then- and reached 1472 (in May 10, 2018) which means a %35.5 increase in a short period of only one month.

Figure 1 shows the average Baltic Dry Index rates of January to May, 2010 to 2018, which demonstrates only two as strong rates as 2018 (2010 and 2014) . Albeit, the 2010 would have to be ruled out of this competition because the dry bulk market had not yet felt the strong world economy depression -which later hit it very hard in 2011-. However, 2014 has a very close competition with 2018 in terms of the highest rates.

For further analysis of BDI rates from 2003 and the forecasting of 2018, please refer to Dry Bulk in 2018 article. 

The red line compares the average BDI rates of the next 3 months, from May to Mid-August and this is where it gets disturbing. The next 3 months of 2014 followed a completely different trend. BDI fell sharply from 1261 to 865 (-%45 change). 2017 followed the same pattern and experienced a -%8 change. More surprisingly, 2010’s May to August rates also experienced -%1.3 change.

Amongst the reasons that may have pushed BDI rates of 2018 (January-May) to a 4-year high, some may have stronger impact than the others:

Re-opening of China’s steel mills in mid-March after a six-month period of production restrictions, part of Beijing’s campaign to protect the environment 

* China’s Iron Ore import increase in March and April due to increase in demand (Cited from Reuters) 

* Increased Activity from Australian and South African Iron Ore producers (Cited from Hellenicshippingnews.com)

However, Future is not very gloomy due to recent trade war between USA and China, Which on the meanwhile if  gets serious, it will have a large impact on the trade in Pacific and world economy.

Who Has Got the First Place?

The answer can be found in Figure 2. Although it seems strange that in March, Capesize rates declined by %25 (compared to February) and in return Panamax rates increased by %15 (compared to February), which pushed Panamax rates higher than its giant rival; However that actually demonstrates the decline in long haul, major bulk commodity trade which resulted in Panamax ships gaining strength and outweighing Capesize ships. However, it seems that previously mentioned reasons have brought the balance and prosperity to dry bulk trade, -and more specifically to Capesizes- which hopefully will not be disrupted by any political turbulences.

 

Notes:

-All BDI rates have been acquired from Quandl.com, However the analysis and converting to chart has been done by Douraghi Co.

دسته بندی:
  economic analysis
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 Ali Karim

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