Resistance is crumbling down among dry bulk shipping stakeholders who are witnessing one of the worst scenarios unfolding in the sector from the beginning of September until today.
The industry’s main freight indicator, the Baltic Dry Index (BDI) ended the week at new lows, at 855 points, down 22.78 percent from the week before, when it had reached 1,102 points. The halt in dry bulk trade is more than evident, as a result of the multiple consequences that the banking and financial crisis has sought upon the global economy. Mining activities and the global steel sector are suffering, as demand is dropping. Dahlman Rose’s latest daily report said that Vale announced cutbacks to output of multiple products, including iron ore, manganese, nickel, ferroalloys and aluminum. On top of planned maintenance to facilities accounting for approximately 20% of its ore production, the miner will shut-in the equivalent of 30 million annual tons of ore production. The actions are a response to rapid drop-off in iron ore demand as steel prices have fallen and steel and mills respond with production cutbacks of their own. Last week, Chinese steel prices were steady near 17-month lows, fluctuating between $525/ton and $540/ton. ‘Vale's production curtailment reflects developments that have already been evident in the dry bulk market, with activity at a near stand-still throughout the week. Rates continue to soften in all regions, and demand for iron ore has dropped off sharply as steel mills continue scale back output’ Dahlman said. As a result, many analysts are scaling down their predictions for the level of freight rates in the coming months. Already the drop in rates between the third and the fourth quarter is dramatic, reaching 78 percent in the capesize type of vessels, according to data from Jefferies.
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