>SHIPPING SECTOR JULY 2012: Update on Baltic Dry Index (BDI) & Dirty Tanker Index (BDTI)

• The Baltic Dry Index (BDI) improved marginally by 8% MoM and is currently inching upwards. The rates have consolidated during the month. However, China’s iron ore inventory remained at an elevated level, which continues to put pressure on the index. The Capesize index continued its negative trend and is down by 10% due to lower Chinese imports of iron ore from Brazil. The Baltic Supramax index rebounded strongly, increasing 21% over its previous month, compared to a decline of 6% in the month before


• The Dirty Tanker Index (BDTI) continued its slump and declined 5% MoM while the Clean Tanker Index also followed the weak trend and was down 7% MoM. The VLCC day rate fell significantly by 57% MoM and has been the worst sufferer in the segment. Suezmax rates fell 23% after making a comeback in May.
However, Aframax freight rates continued to rise (up 17% MoM) providing some relief to owners


• LPG freight rates improved marginally by 2% MoM in the higher end category and displayed a negligible fall in the medium carrier segment


• Utilisation levels for drill ships, semi-subs and jack-ups were at 91%, 91% and 83%, respectively, in June 2012 Outlook


Dry bulkers
Dry bulk rates, which suffered largely in May recovered this month albeit at a slow pace. China iron ore imports increased 11% on an MoM basis providing some relief to rates. The expansionary monetary policy followed by the People’s Bank of China to ramp up the economy is acting as an important factor for demand growth. Its impact on freight rates needs to be seen over the coming months. However, due to dry bulk carrier’s fleet capacity build up with H1CY12 net addition of 40 million dwt and another gross addition of 80 million dwt expected in H2CY12, which is approximately 12% of the total dead weight tonnage capacity in the dry bulk category, any significant upside is highly unlikely.


Tankers
Large tonnage tanker freight continues to suffer with rates dipping below the operating levels denting the margins of the owners significantly. Oil inventory in the US is already at a high level and strategic stock piling of China is happening according to its defined pace. Any significant change in these parameters can seriously ruin the hopes of revival in tanker freight rates. The geopolitical crisis in Iran continues to plague the segment as a drop in oil supplies impacts demand arising from the region.


LPG carriers
LPG rates remain stable with a marginal improvement over the previous month. Large segment vessels showed some strengthening of rates whereas middle segment rates remained mixed.


Offshore vessels
Offshore vessels continued to have high utilisation levels. Continued spending by major global oil exploration/drilling companies led to higher utilisation of offshore vessels.


To read report in detail: SHIPPING SECTOR


RISH TRADER