Baltic index loses last month's gain

The Baltic Dry Index, the global benchmark for freight rates of dry bulk carriers, has lost 36 per cent in the last one month to reach 1,463, reversing the rise it saw in the previous month, giving hope of a freight rate revival to the shipping companies.

The index, which touched an all-time high of 11,793 on May 20, 2008, started sliding following the global economic slowdown. It touched its 22-year low of 663 in December as steel producers cut down production. Even the world’s largest steel maker, ArcelorMittal, breached contracts for shipping cargoes during that period.

The index started seeing a revival since February, reaching 2,298 on March 10 as some Chinese steel producers started stocking iron ore before the end of the financial year. But the revival has proved shortlived as the index has again lost. “Employment for ships will fall; things are very difficult for dry bulk carriers,” said Vikram Suryavanshi, an analyst with Karvi Stock Broking. “We cannot expect the index to recover fast following the credit crisis of such a big magnitude,” he said.

Bulk carriers can achieve the operational cost at the 4,000-4,500 index level and running at the current freight rate is tough. “Today there are too many ships chasing too little cargo,” said K S Nair, director, bulk carrier and tanker segment, at the Shipping Corporation of India, India’s largest shipping company. The company had laid one ship following the massive drop in the freight rate. It revived the ship once freight rates started improving. “Banks have to start lending only then things can improve,” he said.