The BDI shows signs of …resistance

Chartering, Consumers Market, Dry Bulkcarriers, Fixtures, Insight, LNG, Markets, Ship Demolitions, Ship Finance, Tankers — By on February 7, 2014 at 11:57 PM
John Faraclas

John Faraclas

Allaboutshipping.co.uk’s fourth overview of the Shipping Markets and the World Economy for 2014 is in writing as presenter John Faraclas’ cold intervened and…cancelled the fixture…

With the BDI closing just a point down since yesterday at 1,091, it was though 19 points …worse-off since last week’s  1,110 points; this one point down shows the resistance the market …provides to the worst ever predictable market over the last five and a half years, and its worst longest downturn in three decades! Cycles are over; remember this.

The index even went down to 1,084 points on the 4th of February, prompting us to repeat that one category, that of the Cape size cannot alter the overall heading of the market. BCI was up 13 points at 1,588 but all other dry indices went further down – the BPI minus 3 at 1,304, BSI less 18 at 929 and the BHSI down 2 at 674 points. So is the dry market drying out? No I don’t believe so; it’s just the overcapacity and the world’s economic collapse which creates this situation. Prey for further urbanization in China and or India or else…  War perhaps, as yet the last resort and or the alternative: the geopolitics point to war  and the economic crisis, coupled with austerities and unpopular economic policies and  ”sanctions”,  to widespread civil unrests- I can hear the drums of war, do you? This is what my intuition tells me. You need logic and intuition; shipping business intuition! Intuition derives from knowledge, experience and the Gods of Mount Olympus knows what else; intuition is the unpredictable human element that saves us from bad analysts and greedy shipbrokers and bankers – save a couple…, add their bedfellows, that is the shipyards, and see for yourself what happened and what is yet to come. The loss of discipline and world law and business order is the  name of the game today, primarily in the shipping industry given the prices, costs and losses with incalculable repercussions!

On the  short term now: will the market make a 25 centum correction when the Chinese …jump and ride their Horse? Or, as the oxymoron of business intuition dictates, dives further? Can the indices be in bounds because of the Chinese Lunar Holidays? Of course not; these are petty excuses. Have you seen the classic play: Prometheus in bounds…?

Let’s see how grains and iron ore behave during and after the Easter Holidays – for a start and then let’s watch the world’s economy’s turbulations; end of the story.  Seasonal trade and cargoes cannot rule the general state of the markets. Even in reefer trades, where we all used to go sometimes… bananas, there is a better and improved seasonality and usage of ships. The Box trade is unimaginably strange, again due to the slow down of purchasing power by the consumers as a result of the world’s worsening economic crisis. Major calculated mergers take place rising the possibility of major clashes, but personally as I have stated, I don’t see anything wrong; after all it’s a free economy, isn’t? One has also to add the natural “ingredients” affecting the markets, such as bad weather – mainly rainfall and others… Now, read carefully: Shipyards too go under; banks intervene even for LNG tonnage and let’s not forget that China’s newbuilding output dropped by nearly 25 centum – 24,7% to be precise in the space of a year!

On the wet side the BDTI was further down at 866 down 24 points but, wooooow, the BCTI was up 2! Did I hear you say shale… Did I hear you say of new oil and gas wells? Already the energy war and its proxy wars are already on stage. The pipelines will prove, at best a fiasco… Wait  and see what will happen with the EEZ global claims – they triple every year, as the appetite and greediness, needless to say business colonialism, goes beyond national, strategic interest and business logic…

Anyway behind the fireworks at Sochi’s US$ 50 billion Winter Olympics , the “fireworks” of the market’s downwards momentum flares up …and looms in the background. And add the sales and purchase disasters where without any business intuition owners built say Capers in the tune of US$ 100 mio and now same are even down to US$ 55 mio… Any takers? Having said this, what about valuations? Under which proviso valuations took place (and loans where conversely approved and  adjusted / and vice versa when the market values collapsed..) and what were the figures given? Under what considerations? The market projectability? The insurance covers – on what price? The reduction factor(s)?  Would love to hear from the shipbroking fraternity’s panels of valuation how one tackles this sort of situations… and how the insurers view this saga… lastly, may I remind you the rise of the price of steel as an excuse to the added demand and conversely value of ships, just remember that the breakdown, percentage-wise of a bulkers price in 1996 was: 11 percent the hull and 89 percent the equipment; any objection? Then, you tell me what triggered the rise of the price of steel… an issue still unanswered!

The fiftieth anniversary to date of the Beatles in the USA and whatever their twist and shouts brought to our society is a fact and not a fiction, equally today’s twist and turns of the markets and the owners and bankers screaming and shouting, a reality too!

Have a nice weekend… and try to paraphrase the Beatles song “Twist and Shout”…

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    1 Comment

  • Dear John,

    well done, not ever we can understand the business market rules,……or perhaps the leader financial market players “refuse” to hear the “fair” and “independent” opnion of few honest Analysts.

    Fabrizio Vettosi

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