>Shipping Review for month ended September 2009 (GEPL)

“Ray of light seen in the dark tunnel; how far to travel remain a question “

■ Baltic Dry Index (BDI) decreased by 8% on month-on-month (m-o-m) basis as in September 2009
The negative momentum continued with the Baltic Dry Index, a measure of shipping costs for commodities, on signs of increase in tonnage supply, as many new buildings are hitting the water (while less dry bulk carriers are being sold for demolition). At the same time, China's appetite for commodities like iron ore, seems to be fading away at the moment, as steel prices have been steadily plunging in China, which in turn causes many steel companies to cut down their production. According to Fearnley Fond ASA, net growth of the dry-bulk fleet has quickened to between 8% and 9% in the past couple of months, compared with about 3% in the first quarter.

■ Outlook seems to be grim for capsize over next couple of years
The BCI decreased over 30% month on month, at 2,748 points, while the BHI and BSI increased by 17% and 13% to 974 and 1,740 respectively. According to N. Cotzias Shipping, the Capesize market today (end of September 2009) consists of 825 ships of a total of 149 million tonnes carrying capacity, out of that just 16 capes of 2.8 million tonnes dwt have been scrapped. At the same time, the projected contracted and already under construction vessels that will enter the market until 2016 are 736 units of a total 144 million dwt. Out of these new buildings 429 units, or 80 million dwt are to enter the market by the end of 2010. Until today there are 25 new buildings capes cancelled of which 9 were to be delivered in 2009 and 12 in 2010.This is a mere 5% of the total of new ship orders. Based on this assumption, the Capesize market is headon to be over-capacitated by 90-95% if all current trends prevail.

■ Tanker day rates remains sluggish, however signs of improvement visible
The tanker segment continued to decline in the month of September 2009, as crude imports have remained low for much of the month whilst demand for motor gasoline in US have just now starting to show signs of recovery. It is important to note that VLCC and Suezmax cargoes bound for the delivery in the United States this month (September 2009) were higher than those delivered in August 2009 as US crude inventories simultaneously continue to decline. Moreover, crude in storage at sea presently stands at around 36 million barrels - a drop of 64% from earlier highs around 100 million barrels during the April-June period. These should be taken as a positive signs that the disparity between oil supply and demand is starting to improve.

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