Baltic Dry Index slips 43% as China curbs growth

The regulated slowdown of the overheated Chinese economy has had its effect on the global maritime trade with the bellwether Baltic Dry Index (BDI) slipping by almost 43 per cent in three months.

BDI, the benchmark index for all dry bulk cargo like steel and iron ore, has come down from 4,999 in March 25 to 2,849 as on June 14, shedding over 2,150 points.

At the same time, the other major indices, BHMI (Baltic Handymax Index), has nose-dived from 34,485 on March 25 to 18,426 on June 14 on the back of slackening of demand from China.

BHMI thus went down by a whopping 16,059 points or by 46.5 per cent.

"The rate went up substantially as China was guzzling tonne of iron ore and coal. But now they have curbed restriction on import to cool the economy. However, at this point it is still higher that what it was this time last year," said Sudhir Rangnekar, director, Shipping Corporation of India (SCI).

Experts said the meltdown in major Baltic indices could be explained by the fact that global commodity prices have also come down from their high due to slackening of demand from China.

"We expect it going down further in next six to eight month," they added.

In 2003 China accounted for half the global consumption of cement, 36 per cent of steel and 30 per cent of coal. It also consumed large amount of nickel, copper, zinc and aluminum.

The breathtaking growth of Chinese economy, however, helped only those shipping lines who owned ships. Those which used to charter ships could not benefit from the boom.

Chartering has become even more tricky as ships are not available for short duration.

As compared to six to eight duration of charter, ship owners are demanding longer term contract of three to five years. Lines are, however, not confident that the buoyancy in the rates may not last more than a year and there could be a downturn.

Thus, paying a premium now for chartering may not be a viable proposition.