Dry Bulk Shipping Rates - March 24, 2009 - Down 10 Straight Days
Baltic Dry Index ( BDI ) - 1758 Down 15 Spot 4 - TC Average - 19909 Down 288 Baltic Cape Index ( BCI ) - 2195 Down 20 Baltic Panamax Index ( BPI ) - 1526 Up 37 Supramax Index ( BSI ) - 1437 Down 56
Dry-bulk companies accept thin margins to keep their vessels busy.
So many ships, so little cargo. Rates for dry-bulk freight, a leading indicator for global economic activity, have been falling for 10 straight days, reflecting a surplus of ships and falling prices for steel.
On Tuesday the Baltic Dry Index, which is managed by the Baltic Exchange in London and measures dry bulk shipping rates on 40 routes across the world, slid 15 points, to 1,758. That is still above its low near 700 in December, but the slide from 2,298 on March 10 is a negative sign, even though business is being done at reduced prices.
Oppenheimer analyst Scott Burk said that when cargoes move in an environment of decreasing rates it implies a surplus of ships. "If there are a lot of cargoes shipowners expect to come on the market or too few ships they'd probably hold out for higher rates," Burk said. The current state of affairs signals that shipowners are willing to accept low rates out of desperation.
But some owners may feel that as long as charter rates are above the breakeven mark, it makes sense to keep their ships moving.
On Tuesday, the rate for Capesize vessels, the largest size and the one often used in the important iron and steel industries, was $19,909, down from $114,152 a year ago.
Burk said DryShips (nasdaq: DRYS - news - people ) has the highest cash break even cost in the industry with its Capesize clocking in at $14,500 per day, due to its high levels of debt, interest, and administrative costs.
Meanwhile, Excel Maritime Carriers (nyse: EXM - news - people ) Capesize break even costs are $13,000 per day,
OceanFreight (nasdaq: OCNF - news - people ) is just over $12,000,
Eagle Bulk Shipping (nasdaq: EGLE - news - people ) is just under $12,000 as is Genco Shipping and Trading (nyse: GNK - news - people ),
FreeSeas (nasdaq: FREE - news - people ) is just under $11,000 per day, and
Diana Shipping (nyse: DSX - news - people ) is the lowest, $8,900.
Dahlman Rose analyst Omar Nokta said that the market for Capesize ships has been steady due to iron ore being shipped from Australia, but could have been much stronger if steel prices were more robust.
China steel rebar clocked in at $492.13 per ton on Tuesday, down from $698.90 a year ago.
