The Hindu Business Line : Baltic Dry Index falls sharply

With credit availability having become difficult in the world market following the international banking meltdown, there has been some impact of it on the trade.

Santanu Sanyal

Kolkata, Oct. 7

Baltic Dry Index (BDI), an index covering dry bulk shipping rates and managed by London-based Baltic Exchange, dropped to 3,002 last Friday from the peak of 11,000 plus in last May.

“The index has been steadily going down after it reached the peak in May,” according to senior executive of a private shipping line engaged in movement of bulk items, who attributes it to the drop in China trade.

Also, with credit availability having become difficult in the world market following the international banking meltdown, there has been some impact of it on the trade.

On the container front also, the picture is not very different, particularly on the Asia-Europe trade. Hong Kong to Hamburg rates for a TEU are believed to have fallen to $350 plus surcharges against $1,400 last year.

All this has its toll on the charter market. The charter rate of a Supramax bulk carrier has dropped from $50,000-$60,000 a day to around $10,000 at present. Reports have it that the Hong Kong-based OOCL has snapped up a bargain, fixing a 1,700-TEU 2000 built vessel at $10,500 a day for six months. In August, a similar ship was commanding a much higher rate.

However, the shipping circles are hopeful of a turnaround in freight shortly. Not without reasons though.

Last Friday, the BCI (Baltic dry index for Capesize vessels) at 4,254 was up by 57. Similarly, BPI (Baltic Panamax index) at 2,281 was up by 123. After a steady decline in index for several weeks, the trend is towards turning up. This is bound to happen, as the shipping sources observe. The fourth quarter, it is hoped, will be strong.

This will happen because, as it is pointed out, China could not afford to suspend imports of coal and iron ore for an indefinite period. Its present stocks will get exhausted, requiring resumption of imports.

Also, the negotiations, currently in progress with mine owners of Brazil and India, are likely to be concluded shortly. Finally, the bailout package, being finalised by the US, will hopefully improve the availability of credit in the international market.

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