$nat (2)

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Shipping Rates Increase; $BDI Wedge Breakout

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Having felt that BDI had bottomed and recommended accumulation here, here and here it appears that $BDI came back and tested prior breakout support.  Certainly a not unexpected move.  Now, breaking out of a falling wedge, I would imaging that lower area to be tested once more where I will add further to my position in the belief that the bottom is still in and they're finally able to increase rates.

  • Drybulk shipping rates continue to move higher, adding to last week's run as iron ore shipments out of Brazil and Australia pick up.
  • On Friday, drybulk rates as measured by the Baltic Dry Index rose 7.7%, capping a 31% gain for the week driven by strength across the board but mainly in Capesize and Panamax rates.
  • After beginning its ascent on July 23, the BDI has jumped 40%, rising in every session except one.
  • Last week, Capesize rates surged 65% to $15,561/day, Panamax rates climbed 29% to $6,397/day, and Supramax rates added 9% to $9,170/day. (courtesy of S/A)

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Of Shippers And Debt on Germany's Doorstep

Shippers have actually become a drawer stock. As difficult as that may be to comprehend given their debt, the financial crisis forced them to become much more streamlined and economical in terms of transportation. Truth is many container ships that were built pre-2009 are now simply uneconomical to operate. Depending on the ship, some cannot even generate enough income to cover their operating costs. As it turns out, the German banks, for the most part, actually make the capital guarantee part of their loan commitment. The investors lose 100% of their money but are able to walk away, kind of like defaulting US homeowners can in most states. The banks take the loss. Sure, they own the ships, but most are basically so much scrap metal, destined for dismantling in India, Pakistan, or Bangladesh.

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