So far in the New Year, the Baltic Dry Index (BDI), which tracks shipping rates across key routes, has undergone a free fall, hitting a nearly 20-year low, even below the mark that was witnessed during the worst of the post-Lehman crisis in 2008. Shipping companies fear that the fall may take some more time to be arrested, as shippers globally adopt a wait-and-watch policy before going in for fresh bookings.
Oversupply of vessels is another factor aiding the fall of index, which is keeping ship owners a worried lot.
Below 600 levels
For the first time in the last about two decades, the BDI plumbed to below 600 levels, touching the lowest of 651 on February 2, below the 663 mark that the index had touched during the post-Lehman crisis in December 2008.
According to the spot rates that some of the Indian shipping companies booked, the BDI retreated from an average 2,071 in October 2011 to 1,869 in December and below the 1,000 mark after January 2012. Towards January-end and February beginning, the index hit below 700. In November and December 2008, the index had averaged 819 and 743 respectively, when the world economy was plunged into a crisis. In fact, most Indian ship owners feel that while 2011 had been a gloomy year for the industry, 2012 may be even worse. Like their counterparts elsewhere in the globe, Indian shipping companies are considering mothballing a slice of their fleet on the spot market, preferring to wait till the rates pick up. Globally, it is estimated that some 160 container vessels and another 150 in the bulk trade are getting mothballed as the prevailing rates are hardly covering fuel costs. Oversupply of vessels continues to worry shipping companies. “New builds will join the existing fleet in 2012,” Mr Anil Devli, CEO of the Indian National Shipowners Association, says.
Keywords: Baltic Dry Index, BDI, shipping rates, vessels