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402 Points: BDI Hits Sixth Record Low in a Row

Grounding
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Published Jan 12, 2016 8:09 PM by The Maritime Executive

The Baltic Dry Index hit a sixth record low in six consecutive days with a drop to 402 points in trading Tuesday.

Capesize day rates hit $3,200 for an all time index low of 266 points. Panamax day rates hit a similar value for an index of 411 points.

The BDI is down by 96.6% from its peak of nearly 12,000 points in 2008.

Publicly listed bulker operators Star Bulk, Scorpio Bulkers and Paragon Shipping have all sold vessels in recent weeks to reduce overhead and raise funds to repay creditors.

In a new report last week, Deutsche Bank had a warning regarding vessel sales in the current weak market, suggesting that offloading ships could force some operators into bankruptcy as large asset reductions would violate their loan covenants.

Bankruptcy proceedings and forced sales are increasing among bulker companies overseas, and analysts predict many more for 2016. In China, Zhenghe Shipping recently lost two bulkers to court sales in actions brought by unpaid crew, and Fu Lai Deng Shipping lost one ship in September under similar circumstances. The assets of collapsed bulk operator Guangdong Lanhai Shipping, including 28 vessels, were progressively auctioned off throughout 2015 at low prices and with few bidders. Japanese firm Daiichi Chuo filed for bankruptcy in September, following closely after Global Maritime Investments Cyprus. Danish operator Copenship also filed earlier in the year.

Overseas shipyards, especially in China, have been hit hard by a weak orderbook as bulk cargo ship demand plummets. Orders were down 60 percent year on year in 2015. In December, Zhoushan Wuzhou Ship Repairing & Building became the first Chinese state-owned shipyard to go bankrupt in ten years. The Chinese government has created a “white list” of preferred yards, in part to encourage buyers to concentrate their orders at the strongest shipbuilders during a period of consolidation and restructuring.

Separately, bulker operator Fuzhou Yonghua Shipping's 960 dwt vessel Hua Xing 107 and her five crew have been missing since January 8, according to local SAR authority Fujian Maritime Rescue Coordination Center. Search and rescue assets located a sunken vessel fitting her description and have confirmed its identity as the 107. Dive crews will next search the wreck for additional information regarding the cause of her loss. SAR efforts are ongoing to locate any surviving crew.