Dry Bulk in Dimlight
By Aiswarya Lakshmi
Friday, October 30, 2015
Worse is still to come for many bulk carriers, warns a report in the Economist that claims that the dry-bulk cargo shipping has hit the bottom.
Between the start of the financial crisis and January this year Baltic Dry Index - a measure of bulk freight rates—had fallen by 95%.
Though the industry had hoped it would start to recover this year, there is not much sign of that—and it looks as if more pain is still in store for shipowners.
Overcapacity is the main reason for such low rates. When the index approached an eye-watering figure of 12,000 in 2008, shipyards could not keep up with the orders for new bulk carriers.
But then the bubble popped, as demand for commodities collapsed due to the financial crisis, and Chinese economic growth underwent a structural shift away from heavy industry. The index fell to a 30-year low of around 500 in February. There was a modest rebound in the summer, but it did not last.
The dry-bulk lines are not cutting costs and capacity through consolidation, unlike in the container-shipping business.