A five-week slump in dry cargo rates has left the Baltic Dry Index hanging agonizingly above the 1,000-point mark as the much-anticipated fourth quarter rally falters.
Both shipping specific and macro factors are proving headwinds in what is now threatening to be just the latest false start for bulker owners.
Tuesday saw rates in all major markets retreat to drag the BDI to just 1,003 points, while capesize bulkers are earning just $8,941 per day.
Analysts at Clarksons Platou Securities say the capesize sector is facing uncertain conditions, with Brazilian exports, falling Chinese steel demand and subdued steel margins all playing a part.
“Moreover, our brokers report that the tonnage list to Brazil for the next four weeks could impede a recovery for rates on the Brazil/China voyage in the near term,” said analysts led by Frode Morkedal.
“On a positive note, better sentiment is seen in the FFA market, with December contracts now at $11,000 per day, suggesting rates could start to move in a positive direction.”
Amit Mehrotra of Deutsche Bank says last week was the fifth in a row in which bulker spot rates had retreated.
He attributed the weakness to a BHP train derailment at its Australia iron ore facility, a softer-than-expected Pacific coal trade and concerns around US soybean exports
“While the BHP facility is back on line, the market is still feeling the effects,” he said.
Sobering slump
James Johnston of Braemar ACM said the past couple of weeks have been sobering for the bulker market and there is an increasingly challenging set of fundamentals to deal with too.
He pointed to a declining oil price and strong US dollar, falling commodity prices and changing trade dynamics all swaying the market.
As a consequence, short-term triggers like the BHP derailment and China’s winter pollution controls became the straw that broke the camel’s back.
Despite the struggles, Johnston said there is no lack of activity and market expectations for December were more positive.
“And despite (or perhaps, because of) some of the weaker fundamentals, there are reasons to be positive for a rebound - China has long indicated a round of stimulus and infrastructure spending could be rolled out if there is material impact from the trade war on the domestic economy,” he said.
“And though we are seeing a de-stocking cycle in iron ore at the moment, that will need to draw to a close soon, perhaps giving the chance for a later stock build coming with lower prices.”
