Scary freight
Despite the growth of cargo transportation by sea, the index of freight costs Baltic Dry (BDI) has not escaped the so-called crisis "trap”. Currently it has no stable signs of growth, remaining in sideways. Analysts fear that this may signal the impending correction in demand for raw materials - coal, metal, iron ore and grain.
BDI is an index that reflects changes in the value of the marine transportation of raw materials: metal, iron ore, coal and grain. The index includes three other indexes of freight rates that differ by sizes of vessels for which they are designed - Capesize, Supramax and Panamax. Index Baltic Dry freight rates is often considered to be leading indicators, determining nearest prospects of the demand for raw materials. Thus, in 2008, index decrease preceded market fall.
The principal demand for raw materials is provided by industry of China. This fact sometimes allows China to manipulate the market, stopping briefly the purchase of this or that range of goods, thus forcing down prices.
As Ragulina Sophia, senior analyst of UK Everest Asset Management suggested in an interview with PortNews IAA, low levels of index might be explained by market launch of ships introduced in previous years, which provides excess supply and brings down prices for freight.
According to Alexander Ignatyuk, the analyst of Energocapital IK, contradiction between low prices for freight and prices rise for raw material, as well as increased turnover of ports can be attributed to excess of the fleet when the pre-crisis traffic volumes have not yet been recovered. This expert does not expect the correction of the market of cargo transportation of raw materials, since the demand for it now looks quite stable.
Thus, we can assume that in the medium term, a sharp rise in freight rates on raw goods could not be expected, and international centers of shipbuilding did not get enough orders for bulk carriers. On the other hand, with the recovery of world economy drop slumping demand for raw materials can hardly be expected - especially it concerns coal and fertilizers.
Noteworthy,that the index of freight costs Baltic Dry as of March, 31 2010 made up 2.998 points. Since the beginning of the year the index did not change considerably.BDI reached its maximum for the year 2009 November 19, 2009 totaling 4661 points. Its highest level in its history (more than 11700 points) index reached in May 2008, its sudden downfall started in mid-July of that year. Minimum target in 663 points was reached on Dec. 5, 2008.
Turnover of Chinese ports in January-February,2010 grew by 29% compared with the same period of 2009 - up to 1.196 billion tons. Turnover of the seaports was up by 28.6% - to 833.34 million tons, of the riverports by 29.9% - to 362.8 million t. In particular, the turnover of port of Shanghai increased by 39% - to 89.2 million tons, Tianjin by 10.1% - to 58.5 million tons, Tsinhundao by 27.4% - to 41.3 million tons, Qingdao by 8.2% - to 56.26 million tons.