Bulk Rates in Freefall
The Baltic Dry Index has hit a 28-year low after slumping following the big blow of falling commodity prices and excess ships, with the index falling 24 points to 608 points.
In a pre-recession peak, the index recorded 11,793 points in 2008, however it has plummeted by 95% since then and is currently trading at a level similar to the crippling shipping crisis of the 1980s.
The Financial Times reports that the dry-bulk market has been hit by a perfect storm as an armada of new ships, ordered after the financial crisis, have hit the seas just as Chinese economic growth has slowed and commodity prices have taken another lurch lower.
The crash comes after volumes of many traded commodities hit record levels recently, underlining the complex effect of overcapacity.
“The reason dry bulk has been soft for the last few years has not been lack of demand, it’s been excess supply,” said Eirik Haavaldsen of Pareto investment bank.
“Some of the share prices are starting to reflect almost a state of bankruptcy. If rates stay where they are now for another year most of these names will have issues.”