BRASILIA: The Baltic Dry Index started 2014 on a positive note. It concluded at its lowest level of 782. Navios Maritime Holdings’ (NM) management commented that despite the dry bulk volume exceeding 4% during the year, some major variables helped drive the downward trend. Supply chains ran very efficiently with little to no congestion. Robust fleet expansion and a slowdown in scrapping kept the tonnage supply plentiful.
The Indonesian export ban kicked in. Stockpiling had been evident prior to the ban. The major commodities of oil, iron ore, coal, and grain all experienced substantial price deterioration or financing issues over the year. This caused commodity buyers to change their buying behavior. It disrupted some short-term shipment schedules.
In the first two months of the fourth quarter, the downward trend reversed as Brazilian ore exports to China reached their peak for the year. However, this wasn’t enough for a sustained recovery. Coal demand disappointed, particularly in China. On average, the fourth quarter Baltic Dry Index was down 6%. This made 2014 the second worst year since 1999.
In 2015, the year started off poorly. China’s combined monthly iron ore, coal, and grain imports fell sharply in January. They were down 20.6% year-over-year, or YoY. The most severe decline was in coal. Coal volumes were 53% lower at 16.8 million metric tons. In the past three months, the Baltic Dry Index plunged by 60% to record its all-time low of 509. This put more pressure on period rates.
The prospect of a record South American grain export season in the second quarter could benefit Panamax and Supramax rates. The iShares S&P 500 Index ETF (IVV) seeks investment results that correspond generally to the price and yield performance of the S&P 500 Index.
Seasonality in Brazil’s iron ore exports may improve the shipment pace for the rest of 2015. This will aid the low Capesize rates. Also, a record pace of steel exports from China could benefit the Supramax market.
