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BDI’s rising trend signals recovery of shipping industry

BDI’s rising trend signals recovery of shipping industry

BDI’s rising trend signals recovery of shipping industry Monday, 13 January 2014 | 10:00

The rising trend of Baltic Dry Index (BDI) could signal a recovery for the local shipping industry. The BDI – an indicator for the weighted chartering rates for four different sizes of dry bulk carriers – reached its three-year high to close at 2,277 points at the end of last year.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said the upward trend of the BDI was attributed to the ramp up in iron ore stockpiling activities from China in the second half of 2013.

This, it said, resulted in the tightening supply of available vessels.

The research firm expects the recovery of dry bulk rates to be sustainable due to China’s urbanisation and infrastructure projects which remain the main drivers for demand growth of dry bulk commodities.

MIDF Research also expects the ramping up of steel production in China to support the import demand of iron ore and thus spur the global dry bulk shipping volume higher.

The research firm of Kenanga Investment Bank Bhd (Kenanga Research) added that easing pressure of vessel supply, and relatively stronger global economic fundamentals signify calmer waters for the overall shipping and ports sector

The firm saw great potential for a sector re-rating in the first quarter of 2014 (1Q14) while more shipping vessel owners in the market are expected to return in the black this year as shipping rates may potentially recover to breakeven levels.

International Energy Agency (IEA) expects the global oil demand to grow by 1.1 million barrels per day in 2014 compared to increment of one million barrels per day in 2013.

On the supply side, tanker fleet is expected to slow with Aframax fleet reducing by two per cent year-on-year (y-o-y) and Suezmax shrinking by less than one per cent y-o-y, according to Bloomberg Industries.

This, in our opinion, may give some support to the charter rates of the segments mentioned. Survey shows that the charter rates for Aframaxes and Suezmaxes are expected to strengthen by seven and nine per cent y-o-y, respectively.”

On the supply of goods, MIDF Research noted that total deliveries for dry bulk vessels was expected to reach 40 to 45 million deadweight (DWT) in 2014.

It added that the scrapped tonnage is forecasted at 15 million DWT which could generate a net fleet growth of about four per cent.

For 2014, it said the growth in tonnage demand of dry bulk shipping is expected at five to seven per cent, which could beat the growth of net fleet.

The research firm observed that the structural glut in dry bulk shipping which accumulated in earlier years should ease further going forward with healthier demand supply factors.

Source: The Borneo Post

From：hellenicshippingnews