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Baltic Dry falls for 8 days to 956 points, Indian shipping fearful

THE Baltic Dry Index (BDI), taken to be a barometric reading on global economic health, declined for eight days, falling to below 1,000-point mark to 956 on May 19, raising fears that Indian shipping might take a blow.

The BDI index is a composite of four sub-indices that measure different dry bulk ship sizes from Capesize, Panama and Handysize to Supramax. Compiled by the London-based Baltic Exchange, the index is based on a daily survey of agents worldwide.

The BDI hit a temporary peak on May 20, 2008, when the index reached 11,793 points, and thereafter dived to its lowest level ever by February 2016, when the index dropped to 290 points. The index then rose steadily until it again plummeted to 735 points in February 2017. Although, it recovered to stand at 1,333 points on March 28, it has been falling over the past one month, reported Hindu Business Line.

Analysts suggest that the declining index may indicate a lack of demand for commodities like iron ore and coal from China, coupled with Chinese New Year celebrations.

"The level of BDI seen now is a very subdued level. It happens because there is an excess supply while the demand is growing at the normal pace," said an ICICI Securities note.

"So, you might see temporarily spurts in the rates for various reasons, be it temporary increase in demand for coal, or disruption on the route - all these increase the rates."

Stocks of India's major shipping companies, such as Shipping Corporation of India (SCI), Great Eastern Shipping Company Limited (GE Shipping) and Essar Shipping that operate in the segments covered by the BDI index, have been decreasing since the end of April.

Essar Shipping said the Baltic Capesize Index, one of the sub-indices, on the contrary, has been on the up. "There has been some lull in market due to Japanese and European holidays last week but market has again picked up," the company noted.