Shipping Market on Optimism Mode despite Concerns that Return of Economies to Full Normality Might Happen Later than Sooner

In a previous blog about a month ago, we made the argument that despite the high volatility and the considerable pullback that had occurred in year 2020 for the Baltic Dry Index, the long-term trend had not changed and was remaining upward.

The very last month came as a surprise move to inject a quantum of optimism in the shipping market as the Index has now advanced notably from below 1,100 to above 1,400 pts in a period of few weeks.

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

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

Source: Bloomberg, Trading Economics

In our eyes, the broader optimism seen in the stock markets is one of the reasons that has been lifting the sentiment in the shipping market as well, apart from other usual suspects meaning the supply and demand forces and the world trade trends along with the related commodity prices.

We also believe that the bigger picture of the global economy will continue driving the shipping market in the coming couple of months as investors’ focus is on the narrative concerning the Covid 19-related effects on the economies.

How much optimism can emerge for the shipping market from this bigger picture remains to be seen but once again, we could easily argue that market conditions cannot be as unpredictable or unstable as they were last year. Under this concept both volatility and most of the previously unfavorable backdrop can subside and allow for a better year to be realized by the shipping companies and the industry in broader terms; and this might also reflect into the shipping stocks. In conclusion, more optimism and less moodiness is quite justifiable for the shipping market at this very start of the year.