The tanker segment for the shipping industry is expected to fare better than the dry bulk segment attributed to weakening crude oil price and encouraging exports activities.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said the Baltic Dirty Tanker Index (BDTI) has recently rebounded strongly off its low point of 605 in September to a high of 975 in November before moderating to 888 points lately.

The research firm believes the BDTI’s gain was attributed to the declining Brent crude oil price which encouraged shipment volumes.

Additionally, it observed that very large crude carrier (VLCC) rates surged by 89.7 per cent month-on-month (m-o-m) to US$29.4 per day in October.

Looking ahead, MIDF Research expects the BDTI to trend higher due to continued weakness in crude oil prices which encourages seaborne trade activity, a colder-than-expected winter season in the northern hemisphere which the situation could be similar to end of 2013/early 2014 which saw the BDTI soared to 1,344 points and US reaching a breakthrough in legislature allowing the export of crude oil for the first time in almost four decades.

On another note, the research firm observed the Baltic Dry Index (BDI), the weighted average of the freight rates for the four different sizes of dry bulk vessels has eased off from its year high of 1,484 points in early November to 827 points as at Dec 18.

It noted the year-to-date average BDI has fallen by 8.5 per cent year-on-year (y-o-y) to 1,111.6 points due to weak rates across all carrier sizes.

MIDF Research opinied the decline for the BDI has been attributed to the weak economic outlook for China, the world’s largest importer of dry bulk goods such as iron ore, coal and copper as well as weighed down by overcapacity.

It observed the China’s manufacturing purchasing managers’ index (PMI), an economic growth leading indicator fell to 49.5 points which indicated a contraction in Dec from Nov reading of 50.

Furthermore, the research firm also believes China’s steel consumption is easing due to softer real estate market which was reflected by the 0.5 per cent y-o-y decline in home price index in November, the seventh consecutive monthly drop, a sign of economic slowing down.

As for container shipping, MIDF Research noted container rates, measured in twenty foot equivalent units (TEUs) remained flat in October compared with September due to seasonally slower growth in container movements.

It noted year-to-date, US container imports rose more than four per cent y-o-y while European imports registered a six per cent y-o-y growth.

Nonetheless, the research firm said the charter market rates remained flat for all sizes due to strong container fleet capacity growth of 5.4 per cent y-o-y.

Moving into the first quarter of 2015 (1Q15), MIDF Research expects significant overhang in tonnage within the container sector to limit upside potential for charter rates.

It also remains cautious on the outlook of the dry bulk segment of the shipping industry due to lower factory activity amidst the seasonally slow period in conjunction with Chinese New Year.

Also, the potential slowdown in China’s economy could witness the BDI rates to be depressed.

Therefore, MIDF Research has a mixed view on the prospect of the shipping industry in the near future.