Market Continues Strong but It Has to Be Tested Again and Again

The shipping market has been trading along its highs with the Baltic Dry Index settling at around 3,179 pts on July 5-6, 2021 versus 3,119 pts two weeks ago and 2,420 pts almost a month ago.

There is nothing much really to add at this stage given the fact that optimism remains the driving force of this unprecedented rally in the market.

The continuous and very strong uptrend of the dry bulk shipping rates may be relying on the following two explanations if we may add though:

–Conditions of the markets will never be the same and the post Covid-era will not be commensurate with the pre-Covid era, meaning with the normality that we used to know up until the first quarter of 2020;

–Volatility and supply drain, from various perspectives, is here to stay and will put the markets on a mode of behaving like outliers and in this particular case trading at very high levels.

However from our side we would continue to take the “bet” of lower prices in the near future rather than higher ones as result of the view that sooner or later there will be more effective adjustments and most importantly very notable alignments between the supply and demand forces that will be closing the gap and be leading to more normalized levels of rates.

It is still difficult to imagine that dry shipping will remain such an expensive service and for so long despite the fact that Baltic Dry Index has not conceded yet any of its gains.

As quick conclusion, what is out there is mainly exuberance disguised as a persisting uptrend but with very questionable underlying strength which has yet to be tested again and again in order to make us believe in a completely different story.

FIGURE 1: Baltic Dry Index (BDI) – 1 Month up to July 6th, 2021     

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics

FIGURE 2: Baltic Dry Index (BDI) – 1 Year up to July 6th, 2021     

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics

FIGURE 3: Baltic Dry Index (BDI) – 5 Years up to July 6th, 2021     

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics