Baltic Capesize Index on a run
There has been and continues to be a lot of news and analysis about the Baltic Dry Index, BDI, which tracks the cost to ship dry bulk goods. Many “investors” have been using the ups and mostly downs to decide whether to buy or sell a host of shipping companies, whether they are in the dry bulk business or some other shipping business.
One of the subset of Baltic indices is the Baltic Capesize Index, BCI, which tracks the shipping costs on the largest of the dry bulk ships, the Capesize. Capesize vessels are those in excess of 80,000 dwt and primarily carry coal and iron ore. The BCI then tends to fluctuate with the amount of steel being produced.
The BCI spent most of the last year between 8,000 and 19,000 before started to fall precipitously in early September. The ride was straight downhill and the index bottomed at 830 on December 2. Over the last two weeks, however, the BCI has been on a run, increasing 80% to close today at 1,514. Over the same two weeks the broader BDI has increased just 21%.
The BCI is increasing on the hope that the Chinese steel industry will start ramping up again. Iron ore contracts are being renegotiated at closer to the current market prices and if the ore producers give up some pricing they will surely see an increase in volume. There will be a string of Capesize dry bulk ships from South America to China.
I have read quite a few articles indicating that the BDI could be a good leading indicator for and industrial recovery. I thing the BCI may be a leading indicator for the BDI. Do not forget that these indexes are still off 80% from their recent trading ranges and the shipping companies in the spot market are not getting rich, they are just not going broke as fast. That said continued strength in the BDI and BCI will raise investor interest in shipping companies across the board. Here are the shipping companies I am tracking:
- Genco Shipping & Trading (GNK: 22.42 +0.46 +2.09%) Leases their fleet of dry bulk ships on longer time charter contracts contracts. In the 3rd quarter they had daily equivalent revenues of $39k per day and vessel expenses of $4,700 per day. The $1.00 quarterly dividend may be at risk, but the company has been paying out only 50% of net income.
- Ship Finance International (SFL: 19.19 +0.33 +1.75%) Does long term, bareboat charters of tanker, cargo and offshore ships. Revenues and 20% dividend appear to be very secure. A gain in the BDI will definitely help the share price.
- Aegean Marine Petroleum Network (ANW: 27.09 -0.38 -1.38%) is developing an expanding network of fueling stations and bunker tankers to provide fuel to all types of shipping. The revenues and earnings of ANW have little or no relation to the BDI, but the stock price will be boosted if the Baltic Indices continue to rise.
I will be watching the BCI to see how far it can continue to run.
Note: GNK and ANW are components of this site’s hypothetical Opportunities Portfolio. SFL is in the Income Portfolio and a personal holding.
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I am an investor, and I have been watching the situation very carefully. I would very much appreciate a daily e mail about he value the two dry bulk indeces. You can send the information to my e mail. Your kind assistance would be immensely apreciated.
Moulton A. Mayers