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Thursday, July 22, 2010

Prediciting a market turnaround!

From Tradewinds


BDI blues ‘temporary’

Michael Bodouroglou has dismissed a recent plunge in the dry-cargo market as a “temporary dip”.

Paragon Shipping boss Bodouroglou says the losing streak which saw spot rates crash by over 60% has not been matched in the period or FFA markets which have fallen by only 15% and 3% respectively.
Michael Bodouroglou.

Speaking on a Dry Bulk Webinar organised by Capital Link, he said: “What this says is the current spot rates are only a temporary dip.

“I think this sentiment is enhanced by the fact the DBI has recently rebounded.”

Bodouroglou says a reduction in newbuilding slippage rates and delays played a part in the crash, which saw the Baltic Dry Index fall for a record 35 consecutive sessions.

However, he argues the main cause was the “over-inflated” price of iron ore, which led the Chinese to switch to domestic sources.

“Already miners are thinking of returning to sell at spot prices. When spot prices are below the current contract prices the Chinese will start importing and, inevitably, the market rates will go higher,” Bodouroglou said.

Akis Tsirigakis, CEO of Star Bulk, says earlier this year China responded to higher iron ore prices by increasing its stock piles from around 40 days to 72 days. This supply is now being eaten away and he expects demand will soon return.

“There is a poker game being played between the Chinese steel mills and the miners, BHP, Rio Tinto and Vale,” he said. “The Chinese do need the iron ore, so at some point those stock piles will be sufficiently low that imports will have to resume.

“I would expect another month to a month and a half or possibly two of relatively low activity followed by a strong fourth quarter, if I may read my crystal ball properly, and possibly even a spike [in the BDI] if we see a flurry of activity to replenish those iron ore stock piles.”
Akis Tsirigakis.

Tsirigakis says reduced port congestion has also dented rates of late. But he expects queues at key ore terminals in Brazil, China and Australia to start growing again in the fourth quarter.

“While the primary factor in the June and July capesize market fall is the pronounced slowdown in Chinese iron ore imports, the impact of port decongestion releasing more ships into the market has been an additional negative effect on the freight market,” he said.

“I believe this is going to reverse relatively soon and I expect congestion to increase in the third quarter as Chinese iron ore imports pick up to rebuild stock piles.”

Bodouroglou, however, did concede the newbuilding orderbook is a worry.
Given the high percentage of capesize newbuildings in the pipeline he says it is “inevitable” supramaxes and panamaxes will continue to outperform their larger rivals on the spot market.

By Andy Pierce in London

1 comment:

  1. I think the market is turning,
    (I also believe iron ore stockpiles in China are increasing, strangely. (perhaps not at the mills themselves?).)
    India gradually taking a tougher stance to exporting ore - still nothing in concrete. Fingers crossed they do go ahead with the ban, the Chinese will have to pick up some extra volume from Brazil ...