Navigating in Uncharted Waters amid the Pandemic

The bullish sentiment has grown recently even stronger in the dry bulk market as investors and market participants in general continued to discount the impact of China’s strong recovery on the global economy and on the trading activities along the international shipping routes.

The Baltic Dry Index fluctuated above 2,950 by the end of April 2021 having drawn a sharp uptrend in less than a month; from around 2,000 to over 2,950 implying a return of >47%.

FIGURE 1: Baltic Dry Index (BDI) – 1 Month up to April 29th, 2021

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

Source: Bloomberg, Trading Economics

FIGURE 2: Baltic Dry Index (BDI) – 1 Year up to April 29th, 2021

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

Source: Bloomberg, Trading Economics

FIGURE 3: Baltic Dry Index (BDI) – 5 Years up to April 29th, 2021

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

Source: Bloomberg, Trading Economics

Given the current trajectory of the shipping market, a few points could be noted as ideas for more thought with regard to the coming weeks and months:

–China is indeed a key driver of the ongoing global economic recovery from the pandemic levels with demand for various commodities having recently surged; along with the role of the other big economies in North America and Europe these conditions shape an especially favorable environment for the shipping industry.

–With China being currently the main driver of demand, investors should be aware that optimism has been emerging from the recently released economic data from an economy where transparency and visibility is from relatively low to medium compared to the other large economies. So the picture might not have as much glitter as it appears to have from a first glance.

–Furthermore, the pandemic has not ended yet and there are steps to be made from all economies and markets alike, across the globe, for the return to normality.

As a result, we would prefer to remain cautious with the current levels of the shipping market as these are illustrated by the Baltic Dry Index. All in all we continue to view that a phase of correction should be on the horizon given the past performance of the market but also the size of optimism currently injected at these levels.