Date
23 January 2017
Declining demand from China and other major importers for iron ore and coal is exacting a heavy toll on owners of dry-bulk carriers. Photo: Wikimedia
Declining demand from China and other major importers for iron ore and coal is exacting a heavy toll on owners of dry-bulk carriers. Photo: Wikimedia

Ships scrapped as freight rates fall

A growing number of dry-bulk carriers are being scrapped or mothballed as falling commodity prices and an oversupply of ships drive freight rates well below break-even levels, the Wall Street Journal reported.

The Baltic Dry Index, which measures freight rates, has plunged to its lowest levels in decades, hitting a 29-year low in February, the newspaper said. 

This is mainly due to declining demand from China and other major importers for iron ore and coal, two major commodities make up about two-thirds of the global bulk market, the report said.

“China’s gradual shift away from coal-fired power plants to cleaner sources of energy like natural gas is having a detrimental effect on bulk-shipping demand,” maritime consultant Basil Karatzas was quoted as saying.

“The BDI is at 630 points, way below the 2,000-to-3,000 break-even levels, but there is some optimism that we have reached the bottom and a recovery may slowly start at the end of the year.”

While limiting iron-ore imports, China is also building its own dry-bulk fleet, hurting ship owners who charter their vessels.

Daily freight rates for capesize vessels are hovering around US$5,000 with a break-even point of around US$15,000.

So far this year 203 vessels have been scrapped, with a total of 17 million deadweight tons taken off the water, compared with 14 million dwt recycled in all of 2014, the Journal said, citing data from VesselsValue.com.

Brokers said at least nine dry-bulk shippers have filed for bankruptcy protection since the start of the year, and the number may well double before the end of the year, the report said.

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CG

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