Baltic Dry Index (BDI), a measure of shipping costs for bulk commodities, plunged more than 50% to 2,099 points on November 30, against an 11-month high of 4,209 points on May 26, signaling a drop in trade, primarily of iron ore, globally. Industry experts feel that excess supply of vessels, which has led to low charting rates, has to some extent contributed to a drop in BDI.
?China has gone slow on iron ore imports. Also, congestion at ports in Australia and Brazil has declined, enabling a faster turnaround for ships, thus making ships available for re-loading. In addition to this, new deliveries coming to the market this year and the next are adding additional tonnage, leading to softening of charter rates,? Essar Shipping director AR Ramakrishnan said.
BDI is a composite of three sub-indices that measure different sizes of merchant ships, capesize, supramax and panamax carrying a range of commodities including coal, iron ore and grain. Of these, capesize has a higher weightage in BDI.
It is difficult to quantify the additional tonnage coming into the global market this year. However, industry sources suggest that there have been delays in the delivery of new ships, but no major cancellations have been observed. Already, there are more ships in the market than needed. To add to this, new deliveries will be taking place this year and the next, leading to further softening of chartering rates.
?Even a 5% increase in supply leads to 50-60% reduction in the charter rates. There is a supply overhang and a lot of dry bulk ships are on the order book,? said Ramesh Singhal of i-maritime Consultancy. Time charter rates in India for capesize vessels, the largest dry bulk ships, has come down to about $30,000 per day from $48,000 per day. Rates for panamax and supramax ships are hovering around $18,000-$17,000 per day. ?In short to medium term, the industry is cautious. Economy stabilisation in Europe is still uncertain. Positive sentiment in the industry is still eluding,? Ramakrishnan added. Apart from these reasons, iron ore export from India has dipped. ?A ban on iron ore export from Karnataka has contributed majorly to this decline in exports,? said an official from Five Star Shipping.