Baltic Dry Index falls below 300 for first time

The plummeting dry bulk rates are being blamed on an imbalance of fleet supply and demand, along with stagnant cargo trade resulting from the slowdown in China’s economy since last fall.    The Baltic Dry Index, an indicator of charter rates for a mix of dry bulk ships, continued its meteoric fall on Friday, hitting a new low of 297.
   Last August it was 1,222 and its all-time high of 11,793 was reached on May 20, 2008.
   Demand for bulk cargo such as iron ore and coal has plunged as new ships continue to be delivered.
   Earlier this week, Japanese shipping companies revised their outlook for the coming year, citing the downturn in both dry bulk and container business.
   Mitsui O.S.K. Lines made a 2.2 percent downward revision in revenue and 23.8 percent reduction in ordinary income projection for its 2014-2015 fiscal year that ends on March 31 citing “significantly weaker than anticipated dry bulker market despite the tailwind of lower bunker prices, as well as a delay in recovery of containership freight rates.”
   “In the dry bulker business, the market is deteriorating to a new record low due to the imbalance of fleet supply and demand, along with stagnant cargo trade resulting from the slowdown in China’s economy since last fall,” it explained.
   “In regard to dry bulkers, the Company is further reducing the number of free Capesize vessels, while withdrawing from offering excess tonnage in the free-vessel market for Panamax and other mid- and small-size bulkers.”
    NYK noted that in the first nine months of its fiscal year, which also runs through March 31, “in the dry bulk transport market, while shipments of iron ore and grains were up and shipments of coal were on the decline, market conditions as a whole were extremely sluggish in all regions and for all types of vessels. Although the scrapping of bulk carriers, particularly capesize ships, has been underway, excess tonnage has not been cancelled out because of the ongoing production of new vessels.
   “Under these circumstances, the NYK Group promoted more contracts that are less susceptible to short-term market fluctuations, and took steps to reduce costs, such as using slow steaming and either selling off or returning surplus vessels. In addition, the Group worked to improve its balance of income and expenditures through a number of initiatives, such as reducing ballast voyages by combining cargoes and more efficiently assigning vessels.”
   Nikkei Asian Review said in an article published Friday, “The global commodities bust has rocked the dry-bulk shipping industry, with a wave of bankruptcies washing across the sector and major players forced to restructure, divest or scrap assets.”
   It cited a Jan. 5 report from the Shanghai International Shipping Institute that surveyed 50 of the nation’s largest bulk shippers and concluded more than 60 percent of the firms it polled were struggling with long-term losses and about 40 percent faced liquidity problems.
   The review quoted the institute as saying, “The market is extremely depressed and these conditions are likely to continue in 2016, exacerbating dry bulk firms’ losses, increasing costs and creating obstacles to obtaining financing. This will kick-start a wave of bankruptcies.”