S h i p p i n g M o n t h l y R e p or t – F e b r u a r y 2 0 1 1: ICICI Securities

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S h i p p i n g   M o n t h l y   R e p or t   –   F e b r u a r y   2 0 1 1
• The Baltic Dry Index (BDI) declined by 38% to 1107 in January
2011 led by a 42% decline in the Capesize index to 1351 and 29%
decline in the Panamax index to 1310. Steel production in China
increased by 2.7% MoM to 51.5 million tonnes (MT) in December.
Imports of iron ore by China increased by 1% MoM to 58.1 MT
along with a 6.8% MoM increase in inventory levels to 81 MT
• The Dirty Tanker Index declined  by 37% to 662 level while the
Clean Tanker Index declined by 15% to 644 level in January 2011.
The Clean and Dirty Tanker Index both registered significant
declines mainly on account of oversupply of vessels
• LPG freight rates reported an  increase in January 2011 except
large sized vessels that came under pressure
• Utilisation levels for drill ships, semi-subs and jack-up rigs was
reported at 74%, 79% and 73% in January 2011 as against 74%,
82% and 72% in December 2010
• New build as well as second-hand asset prices reported no change
in prices in January 2011
• New build orders for dry bulk vessels declined from 159 to 135
vessels while new build orders for tankers declined from 44 to 27
vessels in January 2011
• Demolition of vessels declined from 115 vessels to 72 vessels in
January 2011. In tonnage terms, 3.2 million DWT of fleet was
scrapped as against 3.0 million DWT in the previous month.
Average scrap prices increased to $443 per LDT in January 2011
Outlook
Dry bulkers
Dry bulk freight rates are expected to recover in January 2011 as ports in
Australia reopened leading to a commencement in shipments of coal.
Further, with the end of the holiday season in China, manufacturing
activity is also likely to pick up pace leading to demand for commodities.
However, on the flip side, high inventory levels in China could lead to a
moderation in shipments.
Tankers
Crude oil tanker freight rates are expected to rise in January on account of
a rise in crude oil shipments while product tanker freight rates are
expected to remain stable in January 2011 as the rise in refined product
demand is expected to be balanced out by new vessel additions.
LPG carriers
LPG freight rates are expected to remain stable in January 2011.
Offshore vessels
Utilisation levels for offshore vessels are expected to rise while charter
rates are expected to remain stable in January 2011. Higher capex spend
by major global oil exploration/drilling companies is likely to lead to
higher utilisation levels for offshore vessels.


Tanker freight rates reported a drop in January across asset categories
with Suezmax and Aframax vessel rates registering a sharp decline. VLCC
freight rates declined to $6696 per day while Suezmax and Aframax
freight rates declined to $8270 and $9192 per day, respectively. After
recovering in November and December, tanker freight rates reported a
sharp decline in January as constant new vessel additions continued to
exert pressure on freight rates.
Dry bulk freight rates reported a mixed trend in January as rates for
Capesize vessels declined by 17% while Supramax and Handysize vessel
rates increased by 6% and 12%, respectively. The reason for the decline
in Capesize vessel rates was the decline in iron ore imports of China from
Brazil (down 6%), which was mainly in the larger Capesize vessels.
However, the rise in Chinese iron ore imports from India (35%) led to a
rise in Supramax and Handysize vessel rates.