Hot Issues in the Dry Bulk Market

2014-05-09

Global Spot Chartering Activity Has Increased

Through the first three days of this week, the Baltic Dry Index has increased by 5 points to 1022 points. This represents an increase of 0.5% from the end of last week. In total, only 36 cargoes have been chartered in the spot market so far week, however, activity was not reported on Monday due to the bank holiday in the United Kingdom. In comparison, 62 cargoes were chartered during the first three days of last week.

Decrease in Dry Bulk Fleet Growth

Approximately 57 dry bulk vessels were delivered in April, a moderate decrease from the 69 vessels that were delivered in March. April saw the delivery of 11 handysize vessels, 20 handymax vessels, 19 panamax vessels, and 7 capesize vessels. In comparison, March saw the delivery of 20 handysize vessels, 13 handymax vessels, 24 panamax vessels, and 12 capesize vessels.

Approximately 28 dry bulk vessels were demolished in April, a moderate increase from above the 19 vessels that were demolished in March. April saw the demolition of 12 handysize vessels, 4 handymax vessels, 2 panamax vessels, and 1 capesize vessel. In comparison, March saw the demolition of 12 handysize vessels, 4 handymax vessels, 2 panamax vessels, and 1 capesize vessel. It is encouraging for the capesize market that capesize fleet growth grew by a net addition of just 4 vessels last month (7 new Capes were delivered while 3 old Capes were scrapped).

Combined with the large amount of iron ore cargoes coming to the market, such low capesize fleet growth has helped capesize rates find significant support recently. Handysize fleet growth has also stayed low (with more handysize vessels actually scrapped last month than were delivered) but Indonesia’s mineral export ban continues to put pressure on handysize freight rates.

Port Hedland Strike Possible

Tensions continue to run high between Port Hedland tugboat workers and BHP and Fortescue (BHP and Fortescue export iron ore out of Port Hedland). The tugboat workers want higher pay and longer leave, and have put to a ballot whether to go on strike. The ballot will officially be counted on May 12th, during which time it will be announced whether the workers have voted to strike. Should they decide to strike, Australia’s labor laws dictate that workers need to give three days notice, so a strike cannot actually begin until May 15th.

Among the worker’s options is to go a one-day strike, two-day strike, or seven-day strike. A strike by the tugboat workers would mean a complete stoppage of iron ore exports from Port Hedland (which exports roughly a little over 1 million tons of iron ore every day). While a one-day strike would have only a minimal effect on the market and could be viewed along the lines of a cyclone simply causing a 24-hour stoppage in shipments, a seven-day strike would result in approximately 8 million tons of iron ore not being shipped during that period. Even worse, miners have suggested that they might be forced to stop iron ore production if a long tugboat worker stoppage occurs due to inadequate iron ore stockpiling capabilities.

A long tugboat worker strike would put pressure on iron ore shipments from Port Hedland, which in turn would hurt the capesize market. However, it is widely believed that one a brief strike -- if any -- will occur.

Source from : CNSS

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