Baltic Dry Index on the downfall with capsize rates down

Baltic Dry Index

The Baltic Exchange Dry Bulk Index (or BDIY) is a composite of rates for different ship sizes factoring in the average daily earnings of capsize, panama, supramax, and handysize dry bulk transport vessels. Meanwhile, the majority of the classes of vessels that make up the index are at their lowest level for the time of year since at least 2006, with the exception of capesize ships which are used to carry iron ore or coal cargoes of about 150,000 tons.

The Baltic Dry Tanker Index’s performance, especially its year-over-year (or YoY) growth, is one factor that has significant implications for companies like DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Partners LP (or NMM), Navios Maritime Holdings Inc. (NM), and Safe Bulkers Inc. (SB), and the Guggenheim Shipping ETF (SEA).

Dip in June

In trading, the Baltic Dry Index declined to 850 on June 30, 2014, from 934 at the beginning from the month. Similar to its rising trend in the first week of June, the index also recorded gains in the first week of July. However, it further reversed the trend and retreated to its 52-week low of 755 in the trading session on July 17, 2014. The index has experienced its falling trend since June mainly due to lower capsize rates. On a YoY basis, the index has declined by 34.5%.

Newbuilding prices for capesize vessels declined to $54 million in June, 2014, from $55 million in May, 2014.

With the shipping industry surrounded by concerns over China’s demand pattern, the Baltic Dry Index has faced a slack period since the beginning of 2014. Meanwhile, the real estate slow down and China’s transformation to a service oriented economy has impacted the dry bulk shipping industry.