Despite the current pullback of the Dry Bulk Index, optimism in the shipping market and among shipping companies seems to be still on as the index has gained around 24% since beginning of December 2020 (from 1,115 to 1,380 points). Furthermore the index remains well above its average levels over the past 12 months.
As some of the risks due to the ongoing Covid-19 crisis are still lurking, questions over the sustainable improvement of the Index and the sector’s charter rates are on the other hand justifiable. The concern is obvious: will the international vaccination process be fast enough to allow the return of global economy to normality without significant delays and in a quite synchronized pattern? If yes then an even more optimistic environment will unfold. If not, then higher volatility lies ahead and in particular for the shipping industry. Already stock markets across the globe are more or less discounting a good recovery path for the international economies or in other words anticipate that that the fight against Covid-19 will bear fruit.
FIGURE 1: Baltic Dry Index (BDI) – 1 Month up to February 3rd, 2021
[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]
FIGURE 2: Baltic Dry Index (BDI) – 1 Year up to February 3rd, 202121
[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]
As charter rates have recovered notably in certain sub-segments of the shipping market, the management teams of shipping companies have also revealed a quantum of optimism to say the least with regard to their future plans. They imply now that they can lean on the recently generated income and make more immediate plans such as renew their fleet, revisit their leverage status and adjust it accordingly or even pay better dividends to their shareholders.
Therefore it would be of no surprise if we see a continuously improving performance of the shipping stocks on the stock market something that will reinforce appetite for risk-on trades in the sector going forward.
