Skip to main content

Baltic Dry Index – Reasoning for its 34 day collapse:




The record slaughter of shippers continues as the BDIY posts the largest overnight drop of 4.5% in the most recent 34-consecutive day trounce in dry bulk shipping rates. At this point it is not a question of if but when the bulk of shipping companies especially levered ones, start going bankrupt and flood the seas with yet more anchored rusting dry bulk hulls.

First over the past month the Baltic Dry index has been droping through the floor, problem is that the container business has not seem the same kind of drop of, my guess, and it can only be a guess is that there are a number of factor affecting the Baltic Dry Index, first is the massive new vessel build that has begun delivery over the past 2/6 months.  Again, actual numbers are not available, but from the new vessel order (size and type) it is clear that 2010 was the beginning of a massive delivery cycle for new ships from an average of 10-20 a year to around 80.  Rising to 100 vessels in 2011/12.

The report estimates that the dry bulk carrier fleet, currently standing at 7,839 ships with a total capacity of 432 million deadweight tonnes, will grow by an average of 9.5 percent through the end of 2013, up from 6.5 percent annual average growth the previous five years.


Clearly some off this new capacity is replacement capacity.  Bulk carriers have a relatively short life, because of the nature of their cargo transport – the average is around 10-14 years.

More important is that China has stopped buying for stockpiling purpose. The trade surplus earlier in the year was low, at least in part because of a surge in commodity stockpiling which, should be treated as capital investments rather than as imports, but that’s over for now, for several reasons, primarily because storage areas are now full.  For bulk carriers the trend line is returning to its 2009 level.  

For Canada the news is not very good, in fact both Canada and Australia seem to be operating on the basis that the high commodity prices are behind us (at least for this segment of the cycle). Last week alone iron ore spot prices fell 9.4 per cent and Brazil-China freight prices fell 20 per cent. China's trade figures showed iron ore imports fell 14 per cent last month, measured year-on-year, after rising an average 8.4 per cent each month until May.

What is true for steel extends to other metals an natural resources, although China recently purchased large amounts of Uranium to fuel its growing number of nuclear power stations.

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process
Post a Comment
Read more

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki
Post a Comment
Read more

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu
Post a Comment
Read more