Issuing agency: China Association of the National Shipbuilding Industry
Column: Statistics
source: https://www.cansi.org.cn/cms/document/13453.html
January 30, 2020, according to the announcement from the Baltic Exchange, the BALTIC EXCHANGE CAPESIZE INDEX 2014 (BCI 2014) closed at a record low of 1 point. On January 31, according to the announcement from the Baltic Exchange, the index continued to fall and broke through the 0 lower limit, closing at -20 points.
The reason, based on existing analysis, is that seasonal factors such as the Chinese Spring Festival, the new coronavirus crisis, rising marine fuel oil, a decline in Atlantic iron ore shipments caused by heavy rains in Brazil, Australian hurricanes and the Cap Lambert fire are important reasons for the decline in "BCI 2014" (Inderpreet Walia, 2020).
BDI is an important indicator reflecting the situation of the international shipping industry and a "barometer" of world economic trends. According to the public algorithm information of the Baltic Exchange, the calculation method of the BDI index is to calculate the BCI, BPI and BSI index of the time charter market and multiply it by a fixed conversion coefficient.
The calculation formula of BDI is ((Capesize 5TCavg x 0.4) + (Panamax 5TCavg x 0.3) + (Supramax 10TCavg x 0.3)) x 0.10. The “TCavg” in the formula is the average time charter rate. Although the reflected content is similar, the “BCI 2014” that fell into negative numbers at the beginning of the year is different from the “Average of the 5” that constitutes the BDI calculation formula. T/C Routes for Baltic Capesize Index” (the full name of ‘Capesize 5TCavg’) has different specific connotations.
As of January 31, 2020, “Capesize 5TCavg” closed at US$3973/day. In terms of contribution rate, since BDI closed at the annual high of 2518 points on September 4, 2019, it fell 80.7% to January 31, 2020, closing at 487 points. “Capesize 5TCavg" has fallen by 89.5% from US$38,012/day, contributing 65.4% to the decline in BDI. In addition, "Panamax 5TCavg" and "Supramax 10TCavg" have fallen by 62.2% and 73.9% respectively, with contribution rates of 13.6% and 21.0% respectively. In terms of contribution rate, "Capesize 5TCavg" is indeed the main reason for the sharp decline of BDI after September 4, 2019, but the trend of "Capesize 5TCavg" is not as incredible as "'BCI 2014' fell to negative numbers".
From the demand side, iron ore, coal and grain, the main cargos that make up the international dry bulk shipping market, are the most basic raw materials for international production and life, and are closely related to the world economic trend. In January, the IMF lowered the 2020 global economic growth rate to 3.3%, which is expected to have a long-term adverse impact on the trend of the international dry bulk shipping market and put pressure on the annual trend of BDI.
In the short term, factors such as heavy rains in Brazil, hurricanes in Australia, and the Cap Lambert fire that affect the trend of the international dry bulk shipping market will have a structural impact on iron ore shipments, but their relationship with total iron ore demand is not significant; seasonal factors such as the Chinese Spring Festival will affect the seasonal production arrangements of Chinese industrial enterprises, but such seasonal factors will not lead to significant annual changes in shipping shipments; the new coronavirus crisis will have an impact on the lives and production activities of Chinese residents, reducing Spring Festival consumption and dragging down industrial production in the first quarter. This affects the short-term consumption of industrial raw materials such as iron ore and coal.
Looking at the whole year, considering that the novel coronavirus crisis is expected to reach an inflection point in mid-February, its impact on China's production and consumption is expected to be controlled within one quarter, with an impact on GDP of about 1 trillion, and the impact on economic growth is expected to be generally controllable. As temperatures rise, factories resume work, and driven by economic indicators, Chinese companies' demand for raw materials such as iron ore and coal is expected to see a compensatory increase, which will help the international dry bulk shipping market rebound later.