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Week 12: Shipping Index Fell, VLCC Rates Plunged by 25%

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Updated

Baltic Dirty Tanker Index 

The BDTI (Baltic Dirty Tanker Index) was at 809 on March 24, 2016. It had closed on 866 at the end of the last week. From there on, the index has fallen each trading day.

The BDTI tracks shipping rates for crude oil transportation on representative routes. Researchers and analysts follow this index to assess companies’ revenue and potential earnings of crude oil (USO) tanker companies like Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).

Investors who are interested in broader exposure to the industrials sector can invest in the SPDR Dow Jones Industrial Average ETF (DIA).

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Seasonality

Seasonality is a known factor in tanker rates. It’s also important to look at the index on a YoY (year-over-year) basis. For the first two days of the week, the index was above last year’s level but it eventually dropped as the week progressed.

Tanker rates

Week 12 was marked by a drop in tanker rates. The rate drop was due to softening of activity, especially in the Middle East and West Africa. According to Allied Shipping Research, VLCC (very large crude carrier) rates for the benchmark Gulf-to-Japan route dropped by 25% week-over-week.

The rate recorded on March 25, 2016, was $49,611 as compared to the rate of $66,641 on March 18. Suezmax rates were down by 10%, and Aframax rates on almost all routes were down.

According to the same report, the first half of April should be a slower period than the corresponding one noted in early March.

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