Baltic Dry Index - Reuters

Baltic index slips on weaker capesize, panamax rates

http://www.reuters.com/article/2012/08/29/baltic-idUSL6E8JTII120120829

Wed Aug 29, 2012 11:26am EDT

By Koustav Samanta
    Aug 29 (Reuters) - The Baltic Exchange's main sea freight
index, which tracks rates for ships carrying dry
commodities, fell on Wednesday on lower rates for capesize and
panamax vessels.
    The main index, which factors in the average daily earnings
of capesize, panamax, supramax and handysize dry bulk transport
vessels, fell 6 points or 0.83 percent to 718 points.
    The overall index, which gauges the cost of shipping    
commodities such as iron ore, cement, grain, coal and
fertiliser, has fallen about 59 percent this year.
    "Overall the sentiment is still bad across all sectors.
Despite record scrappings, the order books remains very large
and most of the world remains either in recession or on the
cusp," Andy Jamison, shipping blogger and owner of the Virtual
Shipbroker said.
    "The entire industry should also be worried about the move
away from coal as a energy source - toward gas and natural
solutions. This will no doubt continue to have huge
consequences on dry bulk vessel demand into the mid and distant
futures." 
    The Baltic's capesize index dipped 5 points or 0.42
percent to 1,177 points. Capesizes typically transport 150,000
tonne cargoes such as iron ore and coal.
    Average earnings for capesizes, which have fallen about 88
percent so far this year, was up $21 to $3,296 on Wednesday.
    "Brokers explained the increase in rates on tighter vessel
supply as bad weather and typhoons led to delays, forcing the
miners to pay up for prompt tonnage," RS Platou Markets analyst
Frode Morkedal said in a note.
    China steel futures hit a record low on Wednesday before
paring losses at the close, dogged by weakening demand in the
world's top consumer that has pushed down the price of raw
material iron ore to levels last seen in 2009. 
    Shipments of iron ore account for about a third of seaborne
volumes on the larger capesizes, and brokers said price
developments remained a key factor for dry freight. 
    The Baltic's panamax index was down 24 points or
2.96 percent at 788 points. 
    Earnings for panamaxes, which usually transport 60,000 to
70,000 tonne cargoes of coal or grains, have fallen more than 52
percent this year.
    The panamax market remained slow with little activity in the
Atlantic on still slower coal and grain trades, analyst Morkedal
said. 
    Average daily earnings for handysize ships were down $66 to
$6,766, while those for supramax ships were up $6 to $8,966.
    Growing ship supply has been outpacing commodity demand for
some time and is widely expected to weigh on dry bulk freight
rates in the coming months.

 (Additional reporting by Nallur Sethuraman in Bangalore,
editing by William Hardy)

Why wont the shipbrokers return my calls?

The following email exchange is a typical one I have with Commodity Traders trying to enter the business.

 

Names and particulars have been changed a little to protect privacy

 

Quote

 

From: .......................

ent: Sunday, August 26, 2012 8:37 PM
Subject: Referral

 

Dear VS,

 

Thank you so much for your blog. I am just starting in the bulk commodity trading business and sometimes I struggle to understand what exactly the mails I receive mean. Last week I got a mail with questions regarding the shipping of an offer I am working on and I have to say that although I knew all the words I couldn't make sense of the whole text :-)) fortunately I found your blog and all the pieces fell into place.

 

I am writing to you because I need to find reliable (and efficient) ship brokers and you say on your web that you could help with this. As I said, I work with thermal coal, iron ore, grains etc shippings are mainly from the Americas’ to China.

 

I'm really new to this business, but what I have learned so far is that most of the offers for are FOB and most of the requests are CIF. The people I have worked with so far are slow to react (I'm still waiting for a quotation I asked for 10 days ago) so I think I should really try to build my own contacts with shipbrokers if I want to be successful. I would be really grateful if you could recommend me somebody.

Once again, thank you for your blog. You just don't know how much you have helped me already.

My best regards,

Jo Doe

 

++++++++++

 

My reply

 

Quote

 

Hello Jo

 

Thanks for making contact

 

I think I need to explain the process so that you can see why you are getting no replies.

 

Chartering a ship is a little (actually big) different to say booking a container for shipment. The difference is usually 1 million bucks give or take a few hundred thousand dollars. The other difference is that unlike container shipping where a broker or an agent quickly looks up a shipowner’s schedule of rates, in bulk shipping it can take days and many man hours for a shipowner to give you a freight rate.

 

These two things mean two important things for you as a prospective customer.

 

1. Shipbrokers and shipowners will not spend days giving/preparing rates for you unless you have credibility. Credibility is gained by either showing them that the business is already bought and sold (i.e. its firm shipping business) or unless you can prove that the deal is 90 pct chance of happening.

 

You may say in counter "how can I know if the business is workable if I do not know how much the freight component will be?” And the shipbroker and shipowner will reply "that’s not my problem but I am not going to spend 2 days doing your job for you. If you have no idea of the freight component then it shows brokers and shipowners that you probably are wasting everyone’s time"....

 

2. If you have never fixed a ship before then your chances of getting support / freight rates / shipowners interest is virtually zero again unless you prove some credibility. They will not hand over a 25 million dollar ship to someone who does not know what they are doing. They will also ask to see financials. Unless you have a few million in your bank then how do they know they will get paid?


Shipping payment terms are generally upfront - i.e. the moment the ship finishes loading. So if you as a trader are waiting for money to be received from the buyer after the ship discharges then this will not work (in terms of cashflow). You need money and / or access to credit. They also need to know that if something happens to the ship that they can sue you. If your company is worth usd 10,000 bucks then they won’t touch you..

 

Hope this explain why you are getting no answers...

 

If you can prove your credibility to me then I can for sure help you....but I don’t want to waste your time and the shipbrokers / shipowners I recommend

 

Cheers
VS

Best Invention for decades

Wish i had thought of that - The invisible bike helmet

Imagine if we could invent ones for ships just prior to a collision! Brilliant........oh and now i have come up with the idea..........dont try and steel it!

Difference between a "charterer" and a "shipper".

A question has come up with my latest group of brilliant students partaking in the popular VS DRY CARGO CHARTERING AND SHIPBROKING CERTIFICATE.

 

There was some confusion between the terms 'charterer' and 'shipper' - specifically when talking about the idea of 'deadfreight'.

 

To make things simple - the first distinction I need to state is that as a shipbroker and dry dry cargo shipping specialists contracts are always between 'charterers' and 'shipowners'. In other words for the purpose of a contract the word 'shipper' is irrelevant. Many think they can use the word 'shipper' and 'charterer' in substitution but you cannot. Shipper is not a word we use when discussing the commercial aspects a charter agreement.

 

Lets break it down...

 

A shipper is the party who supplies the raw materials to be shipped. They may or may not be the charterer.

 

EG...An African Mine sells it minerals to China. The Chinese customer buys basis fob and hence arranges the shipping.

 

Who is the charterer? Answer........The Chinese mine
Who is the shipper? Answer...........the African mine.

 

So in the charterparty the contract is between the Chinese mine (as the charterer) and the shipowner. The African mine is not a signatory to the shipping contract.

 

What complicates things a little is that in many cases the shipper is 'also' the charterer

 

EG An African mine sells it minerals to China. The Chinese client buys CNF and hence leaves the Africans to arrange the shipping. In this case the African mine is both the Shipper and the Charterer.

 

These distinctions can get even more complicated. Consider this scenario.
 

• African mine produces the minerals
• African mine has marketing agreement with large trading house eg Bunge which agrees to buy and sell all of the mines product on an exclusive basis
• Bunge sells the minerals CNF to Chinese Trading house (bunge organises the freight)
• Bunge is now the charterer and engages the services of a shipowner.
• Prior to ship arriving in China - Chinese trading house then sells the product to final user of the mineral (could be a steel company for example).

 

Above highlights the complicated nature of commodity transactions. But i like to keep things simple. Good rule for young shipbrokers.....avoid using the word shipper and only use the word 'charterer' when talking about the company that controls the cargo!

 

Hope this explains....if there are any questions then shoot!

 

VS

OUCH!

OUCH - I'm just saying

Some of you keen observers will notice that I have decided to focus on a tragic moment from the London Olympics rather than say a cyclist passing the finish line with arms raised, or a swimmer punching the water in Ecstasy after claiming gold. And yes you are right - that says more about me than you....

I have enjoyed these Olympics. So much drama, so many great performances and not just from the athletes. The media are gold medalists for sure. I love the focus on 'medal tallies'. Its a bit sinister - a little like a 'casualty' tally in times of war. Which nation is defeating the other!

Oh this is war.....make no mistake......national pride is at stake.

That brings me to Kazakhstan.....

Never in the history of the world has a country been more deserving of the acolades that it will now be afforded. The Borat series has only made this triumph so much sweeter. I love an underdog story and surely this is one of the greatest to be told!

Rumour has it the USA are looking at setting up European base of excellence in Astana the capital of Kazakhstan....just waiting for Senate approval.

Now back to my interest in my home nation - the landlocked Himalayan kingdom of Bhutan. Imagine my dismay in realising that "Sherpa hiking" (walking 200 miles whilst carrying 80 pounds on the back  whilst being shadowed by an over weight Westerner), "race the landslide" and "blue sheep spotting" failed once again to gain Olympic accreditation. The Russians and Chinese voting against. Alas our two athletes competed in archery but failed to make the finals.

It has been said though that our two athletes are by far the 'happiest' in the athletes village. An that is quite some feat considering the level of condom usage being reported on the wires.

At one point i wanted my daughter to be an olympian. Now i will push her to towards the arts....

VS

The Virtual Shipbroker and Reuters...

I was contacted recently by reuters to lend some commentary to the shipping markets...

So I will be one of their regular analysts...

This out today

Quote


Baltic index stays pressured on low demand

Wed Aug 1, 2012 4:10pm GMT
 


Print | 
Single Page

[-] Text [+] 


Aug 1 (Reuters) - The Baltic Exchange's main sea freight
index, which tracks rates for ships carrying dry
commodities, fell for a seventeenth straight session on
Wednesday due to limited shipping activity on sluggish raw
material demand.
    The overall index, which reflects daily freight market
prices for capesize, panamax, supramax and handysize dry bulk
transport vessels, lost 19 points or 2.12 percent to 878 points.
The index has fallen about 49 percent this year.
    "The Index is being pulled down by a mixture of sluggish raw
material demand, a continued oversupply of ships, the Olympic
games and the holiday season," Andy Jamison shipping blogger and
owner of the Virtual Shipbroker said.
    The capesize index was down 1.09 percent at 1,181
points. 
    Average daily earnings for capesizes, which usually
transport 150,000-tonne cargoes such as iron ore and coal, were
down $192 at $4,358. 
    Capes are down due to a very limited new enquiry out of
Australia and Brazil, Jamison said.
    "It may seem that players' focus is presently more on London
(Olympics) 2012 than minerals trading, and the absence of fresh
enquiry is adding further downward momentum in a segment already
under severe pressure," broker firm Fearnleys said in its weekly
report.
    Chinese steel futures fell nearly 2 percent on Wednesday,
snapping six consecutive sessions of gains, as
weaker-than-expected Chinese official manufacturing data dented
market confidence and rekindled worries about sagging demand.
 
    Iron ore shipments account for around a third of seaborne
volumes on the larger capesizes, and brokers said price
developments remained a key factor for dry freight.
    The Baltic Exchange's panamax index fell 2.85
percent to 954 points, with average daily earnings for
panamaxes, which typically transport 60,000-70,000 tonne cargoes
of coal or grains, down $225 at $7,612.
    "The coal market is in free fall and producers have even
started closing high cost mines, which was unthinkable six
months ago," Jamison of Virtual Shipbroker said.
    He noted that the poor demand in the U.S and high
inventories in China coupled with higher supply have led to a
fall in coal prices.
    "Most coal suppliers are still trying to sort out previous
positions rather than even looking at new sales," he said.

 (Reporting by NR Sethuraman in Bangalore; Editing by Alison
Birrane)
 
unqte

Pretty cool hey! 

Glad to have the worlds premier news service in Reuters as a supporter of this blog!