The spectacular rise in freight rates this year could be coming to a swift end, says Amrita Sen of Barclays Capital.
Chinese commodity buying has helped lift the Baltic Dry Index (BDI) – which measures the cost of moving dry raw materials such as iron ore by sea – up by 350% from its December lows (although it’s still down 75% from last year’s peak).
Long waiting times to load (in Australia) and unload (in China) tied up many ships. June saw a record 87 Cape-size vessels (those that typically carry 150,000 tonne-plus cargos) idling outside ports.
But reports of cancelled bookings are now “pointing to a slowdown in Chinese buying of coal and iron ore” and the BDI is down 20% in the first half of July.
For shippers, it’s a reminder that, for a long time to come, demand will depend on “one factor more than any other”: China.