BDI Speculation: Beware the Unwinding of Congestion/Inventory Build

After a relatively quiet week for dry bulk shipping rates (for things like iron ore, coking & thermal coal, and grains), I thought it was useful to report Mr. Charles de Trenck's recent words on Baltic Dry Index (BDI) speculation. The BDI has held up lately, but has been helped by continuing port congestion and Chinese port inventory build. To me, it seems the BDI above 4000 likely requires these factors to continue and as they are likely unsustainable, as Transport Trackers reiterated, "chasing the BDI above 4000 makes no sense". In the short term, the BDI can go anywhere, but odds are stacked against you in the current environment. For example, see my recent piece in regards to declining steel and seaborne iron ore trade this year, which is a major headwind the BDI faces in 2H09 especially after the spectacular growth of the bulk shipping fleet in the recent shipping boom.

BDI speculation: We exited the BDI rebound above 4000 in early June, and all we have seen in recent weeks are speculative and volatile commodities’ moves. In other words…froth. And this even though there were too many Capes sucked into China congestion (ie, the ramp up in China congestion in recent months). We continue to think select cargo cover charters can offer opportunities, while chasing BDI above 4000 makes no sense

Baltic Dry Index: