FT Alphaville, and others, watched the Baltic Dry’s recent 60 per cent tumble, which took place over a run of 35 consecutive days, with particular interest.
Some, after all, suggested that it meant the index was no longer a valid economic indicator. Other worried that it was just that.
It is with interest, therefore, that we note Icap’s latest monthly shipping report — which errs towards the notion that the move wasn’t necessarily so unusual.
According to the broker, for example, the BDI has fallen in June on 20 separate occasions since 1985 — making the recent declines relatively consistent.
As they noted:
..no other month can claim to have sucha a poor track record, although the month of July has shown a similar tendency towards weakness over the years.
And here’s the supporting data:
All of which is apparently linked to the fact that of the three major vessel classes included in the index, the Capesize sector (Handymax and Panamax being the two others) shows a particularly strong tendency to decline in the second quarter– largely due to its reliance on only a handful of key raw materials.
As they note:
Indeed, as illustrated in figure 2, statistically the likelihood of iron ore trade volume declines on a month-on-month basis are greatest during the second quarter. Events so far this year have supported such ideas; Chinese iron ore imports declined in June for the third month in a row to little more than 47Mt, nearly a 12Mt drop since March. So, not only have Cape-owners this year been fighting against this ‘cyclical tide’, but they have also had to contend with a concerted effort by the Chinese – the key iron ore buyers — to rein in their massive stimulus spending.
Related links:
What’s up with commodity currencies? – FT Alphaville
Freight fright *alert* – FT Alphaville
China tightening? Yeah right. – FT Alphaville