Stanislav Oleynikov

Dry Bulk Shipping: Recent BDI Rise Is Heartening

The only commodity that is really important for drybulk shipping, at least as far as Chinese import and capesize market are concerned, is iron ore.

Last year China imported only about 6 million tonnes of coking coal and about 36 million of power coal. It compares with more than 410 million tonnes of iron ore imports.

The amount of other commodities in dry bulk shipping routes to China is marginal.

What really important for shipping rates is supply vs. demand picture. This issue was not address in the article.

There was really significant activity in chartering ships to haul iron ore to China in the last several weeks. Over 150 spot capesize vessels are heading to China at the moment. It compares with virtually zero activity in the spot market two months ago and may easily lead to oversupply of iron ore in Chinese ports again by spring.

But even such frantic chartering activity could not significantly rise spot capsize rates above OPEX level. Current spot level of $15,684 looks decent (though it only a fraction of the rate required by overleveraged US listed bulkers like GNK, EXM, DRYS, which bought a lot of their levels at huge bubble prices, to stay afloat).
However, not a lot of currently idle capesize vessels are able to get this kind of rate at the moment. BCI index is actually determined by rates on several shipping routes. In Europe, where it is hard to find an available capesize vessel, it is possible to charter a ship for $24,096 a day in the moment. But in the Pacific, where most of the trade is actually concentrated (on Australia to China route), the spot rate is only $6,036, still below OPEX level. This is the region where most of the idle vessels are located in the moment.