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Freight rates, which had fallen considerably by end-January due to the Chinese New Year closure, may show some recovery by March. However, they may not touch the November 2009 levels
The Baltic Dry Index (BDI) has fallen considerably over the past few weeks till end-January due to closure for the Chinese New Year. The BDI may show some recovery by March, but it would be lower than the November 2009 level, says an industry expert.
BDI, which is a major indicator for the dry bulk segment, has fallen to 2,963 on 28th January from an average of 3,572 in December. “The reason is very clear; we are entering the Chinese New Year. In China they have a complete shutdown during this period. We will see a revival in these falling rates in about a month, in March 2010,” said Capt KS Nair, director, bulk and tanker division, Shipping Corporation of India (SCI). State-run SCI is the largest shipping company in India with a huge presence in the dry bulk and tanker segment.
However, the BDI may find it difficult to retain its earlier level reached in November 2009. Capt Nair said,”After this New Year period, the rates will recover only up to the December levels, but the November level may not be possible.” The BDI average in November was 3,941.
Contrary to the decline in the BDI for the dry bulk segment, certain amount of recovery has been witnessed in freight rates for the very large crude carriers (VLCC) segment. The freight rates in the VLCC segment had zoomed to a high of $50,620/day on 26th January.
However, Capt Nair does not see any long-term relief. “The rates in the VLCC segment have recovered due to the winter effect. However, for the long-term period, they will be still steady at $28,000 to $30,000 (daily) levels,” he said.