Baltic capesize and panamax indices hit rock bottom

Liz McCarthy - Tuesday 2 December 2008

The capesize index has fallen to 830 points. The capesize index has fallen to 830 points.
CAPESIZE and panamax indices are at the lowest-ever levels recorded in the Baltic Exchange’s history.
 
The capesize index today fell to 830 points and the average time charter rate to $2,316 per day, less than 1% of the record high of $233,988 recorded on June 5. 

The panamax index also hit bottom at 589 points. Both bulk carrier sectors are now at levels never seen since records began to be kept in 1998 and 1999 respectively. 

Panama average time charter rates are now 5% of the record high in October 2007 of $94,977 per day. 

A tonnage oversupply has seen rates fall to spectacular lows, including Cargill’s transatlantic round voyage at $1,000 per day, and a zero-dollars-per day fixture in October. 

“It’s difficult to see how much lower it can go. This is desperate stuff,” said a Baltic Exchange freight market representative. 

“China shipping iron ore on a spot basis from India is part of the reason [for rates falling]. There is a substantial number of owners who just won’t trade at these levels.” 

The Baltic Dry Index has fallen to 684 points. The last time it fell this low was over 22 years ago on April 15,1986. 

If the rates continue to plummet the index may approach its lowest recorded level of 554, in early August 1986. 

“Expect the unexpected,” a source at the Baltic Exchange said. 

Rates have plummeted sharply since September 15, when US investment bank Lehman Brothers collapsed. At the same time the Chinese cut back iron ore shipments as world steel demand collapsed.
Cargo cancellations remain the chief problem for owners, as many receivers struggle to open letters of credit, as the global financial crisis restricts access to trade finance. 

South Korean and Chinese operators who piled into the market taking ships at high rates for long periods of time when times were good have also defaulted as levels fall below sustainable levels. 

“When the market was hot, there were a lot of players,” said one mid-level operator, who said he only did business with a dozen creditworthy traders. 

He also reported difficulties getting paid for ships chartered from his company. “People are paying a little late, but you just have to strong-arm them and the money comes in,” he said.
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