Baltic Dry Index Continues Seasonal Rise

Jack A, Bass Managed Accounts hold DRYS, SB and DSX

BDI Update  – 4% added to the 9% jump this week.

Snapshot for BALTIC DRY INDEX (BDIY)

Open: 1,541.00 Day Range: 1,541.00 – 1,541.00 Year To Date:
Previous Close: 1,478.00 52-Week Range: 661.00 – 1,541.00 1-Year:

Dry bulk shipping shares are highly correlated with shipping rates.

The seasonal patterns in shipping rates:

Dryships in its annual report states that the seasonal pattern is “stronger in fall and winter in anticipation of stronger consumption of coal and other raw materials in the northern hemisphere during the winter months.” Furthermore, the monsoon rains disrupt Indian trade from June to September. This year’s monsoon is nearly over. Rain in Brazil disrupts trade from December to March.

Iron ore production is particularly affected and exports usually increase in q2 or q3. December through March also can suffer from weakness due to low temperatures in China and rain in Australia. Australian iron exports in February 2013 were 16% less than in December. Brazilian iron exports in February were 25% less than in December.

In the winter demand for dry bulk shipping is at its low point as North American grain shipments end and rain in Brazil and Australia reduce iron ore supply. Demand picks up a bit in the spring with South American grain shipments and then falls in the summer when South American grain shipments tail off and the monsoons hit India.

In fall North American grain shipments begin and the Indian monsoon season ends. Shipping rates typically peak in October and November with good weather and strong grain and coal shipments.

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