Dry Bulk Weekly – June 14, 2010

Baltic dry index fell 14.5% last week; The hardest hit were Capesizes with 16.3% loss and Panamaxes with 13.3% loss; Supramaxes and Handysizes lost 12.1% and 6.5%.

Platou Markets:

Chinese iron ore imports fell to 51.9 mt in May from 55.3 mt in April. After being up 11.7% for the first four months of the year, the import growth pace has slowed to +7.5% for the January-May period after May was the second month in a row with negative y/y growth (-6%). The January-May run rate suggests a zero growth in iron ore imports by China this year which would leave it around 630 mt. Copper imports also fell for a second month in a row (down 6% y/y and 9% m/m) as stockpiles monitored by the Shanghai Futures Exchange are 60% higher than at the beginning of the year, despite being off 17% in May from a 7 year high in April. We have earlier forecasted that due to steel mill margins under pressure and decent inventories of steel products, we may see a softening in steel output going forward that would reduce the need for iron ore. In addition, we have seen that stronger iron ore prices have triggered higher domestic output. If recent trend continues, the drybulk market and the Capesize segment in particular may take a hit through second half of 2010 as slowing demand will be met by about 20 newbuildings arriving per month.
Looks like we have some additional indications of China slowing down.

Chart 1. Baltic Dry Indexes Relative Performance

Source: Bloomberg

Chart 2. Baltic Dry Index

Source: Bloomberg

Chart 3. Baltic Dry Index Components

Source: Bloomberg

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