BDI breaks 5000 points! Will the bulk carrier market usher in a five-year boom?

The BDI index soared for three consecutive days, breaking the 5000 mark for the first time in 13 years. The dry bulk shipping market may usher in a five-year boom.

Cape ships led gains, with the BDI index hitting a 13 year high

On September 29, the Baltic dry bulk freight index (BDI) rose 235 points to close at 5197 points, or 4.7%, setting a new closing high since September 9, 208 and breaking the 5000 point mark for the first time since September 10, 2008. Over the past month, the BDI index rose 22.72%.

Among them, the Cape of good hope bulk carriers still led the rise. The Baltic Cape of good hope bulk carrier freight index (BCI) rose 696 points on September 29, breaking the 9000 point mark to 9018 points, an increase of 8.37%, a new high since September 2, 2008. The average daily rent increased by 5773 US dollars to 74786 US dollars. Over the past month, the BCI index has increased by 46.35%.

On the same day, the Baltic Panamax bulk carrier freight index (BPI) rose 7 points to 4037 points, or 0.17%, and the average daily rent increased by US $64 to US $36335. The Baltic Sea super flexible bulk carrier freight index (BSI) rose 6 points, or 0.18%, to close at 3379 points.

Benefiting from the rise of global raw materials and the peak season of coal demand in winter, the BDI index quickly resumed its rise this week after falling once last Friday, rising 73 points to 4717 points on September 27 and 245 points to 4962 points on September 28.

BDI breaks 5000 points! Will the bulk carrier market usher in a five-year boom?

In contrast, the bulk carrier market was at the bottom last year. The highest BDI index was only 2097 points, and the lowest was 393 points, with an average of only 1066 points. This year, the lowest point of BDI index is 1303 points, and the highest point is now close to 5000 points.

In particular, the supply of Cape of good hope ships is in short supply. BCI broke through 7000 points and led BDI to sing a triumphant song all the way. In most of the third quarter of this year, the dry bulk shipping market showed an upward trend, which gave dry bulk ship owners reason to believe that the market was ushering in a new round of growth.

China is about to launch a seven-day golden week on October 1. The operators rebuild their inventory before the holiday, which also led to the rebound of spot iron ore prices.

Peter sand, chief industry analyst of the Baltic International Shipping Association (BIMCO), pointed out that the world's largest iron ore exporter has finalized more and more spot charter contracts, which has significantly boosted the dry bulk shipping industry. The increasing spot export volume of iron ore is the main driving force for the freight rate of bulk carriers, especially the Cape ship market, because the export of iron ore from Brazil and Australia accounts for the largest proportion of the demand for Cape ships. Peter sand pointed out that the dry bulk cargo peak season and port congestion in China will at least keep the spot freight rate of bulk carriers high until the end of 2021.

With the superposition of the three factors, the market can flourish for at least another five years

Affected by the epidemic, the global economy has been hit hard. In order to promote rapid economic recovery, governments all over the world have launched infrastructure plans. The United States passed a $1 trillion infrastructure bill, and India also plans to launch a $1.35 trillion infrastructure plan. Clarkson estimates that the global infrastructure budget is expected to reach US $2.76 trillion this year, which will be increased year by year, and will exceed US $3.3 trillion by 2031. Cape of good hope ships mainly transport iron ore, and the demand for infrastructure will boost the market demand for large bulk carriers.

On the other hand, the abnormal climate has greatly increased the food demand of many countries, which is good for Panama type and handy bulk carriers mainly transporting coal, pulp, grain, sawdust and other goods.

Industry insiders also pointed out that due to the upgrading of China's "dual control of energy consumption", local enterprises have successively received notices of compulsory power restriction, production restriction and shutdown; According to the estimates of international professional institutions, China has been in a power shortage caused by insufficient coal supply for a long time, and the reduction of coal inventory is also one of the important reasons. With the reduction of coal inventory, there has been a serious shortage of ships in the market since this year, pushing up the freight rate of bulk carriers.

In addition to China and India, which were originally major coal purchasers, Europe has also stepped up its efforts to import coal this year. In Europe, due to the impact of climate, the production capacity of wind power generation is insufficient, the price of natural gas rises sharply, and the market is short of electricity, so it has to purchase coal for emergency. At present, the freight rates of all types of ships in the futures market are also significantly higher.

BDI breaks 5000 points! Will the bulk carrier market usher in a five-year boom?

Christopher Whitty, business director of intermodal maritime port, analyzed that although China's crude steel production has decreased year-on-year in the past two months and the iron ore price has plummeted from $230 / ton in mid July to less than $100 / ton, China's emission reduction policy may further support the ton nautical mile demand of dry bulk cargo transportation. Although the above policy will lead to a shortage of coking coal and coke in China in the short term, it has stimulated the willingness to buy iron ore, especially from the Atlantic market.

Whitty pointed out that since this year, the demand for key raw materials such as iron ore and coal has increased significantly, exceeding the growth of fleet capacity, while supply chain congestion has squeezed part of the capacity, resulting in tight supply and demand and high freight rates. The new development of the market will reconstruct the new pattern after the epidemic, which will continue to provide momentum for the demand for dry bulk shipping.

Due to the superposition of ship shortage, port congestion and rush purchase of energy, the freight rates of bulk carriers are rising rapidly driven by Cape of good hope ships, while the freight rates of Panamax and handy ships are expected to increase gradually due to the arrival of the peak season of grain transportation in North America.

LAN Junsheng, chairman of Huiyang shipping, pointed out that he is optimistic about the dry bulk shipping market in the next few years. The biggest reason is the lack of ships, and the delivery of new ships remains low. It is expected that only 300 new ships will enter the market in 2022 and only 103 in 2023; At present, there are 364 Panamax bulk carriers with an age of more than 20 years, accounting for about 11.5% of the fleet. There are about 409 super handy ships with an age of more than 20 years, and 562 handy ships.

LAN Junsheng said that this year is the best year since the financial crisis in 2008. Due to the small number of new ships in the next two years and the strengthened carbon dioxide emission reduction policy of the International Maritime Organization (IMO) in 2023, the shortage of ships will be more serious, while the holding orders of bulk carriers are low. It is estimated that the bulk transport market will flourish for at least five years.

Wang Shuji, general manager of Yumin shipping, also pointed out that based on the experience of 2008, it is not impossible to maintain the market prosperity for 4-5 years. It mainly depends on the supply and demand. Zhang Zongliang, deputy general manager of Yumin shipping, also believes that from the perspective of hand-held orders, there will be a shortage of transport capacity in the market in the next two or three years. Due to the deterioration of global climate anomalies, it is estimated that many countries and regions will accelerate emission reduction, which will also lead to the compression of transport capacity supply and prolong the prosperity of the bulk transport market.

Clarkson data show that the transport capacity of the bulk carrier fleet will increase by about 2.4% this year and 0.9% next year, while the demand is estimated to increase by 3.6% this year and 3% next year, both higher than the supply. Meanwhile, at present, the delivery berths of shipyards around the world by 2023 are mainly container ships, and the order delivery of bulk carriers is scheduled to 2024.