With the Baltic Dry Index rising at these levels, meaning as of today March 3rd, 2021, levels that are much higher than the ones of December 2020 and even more compelling than the levels back in May 2020, the following question can easily arise: Can this market sustain its current trades and look at an even higher territory?
It is true that many shipping companies have started calling this market as “super” which is by all means a very bold characterization and at the same time it could be an overstatement in comparison with what may be the real underlying story.
Yes of course as we all know, the relatively low supply of vessel capacity and the bottlenecks seen in major international ports due to the covid-19 side effects have been the most pronounced factors of the market’s recent rally which drove shipping stock prices to their highs. We may also add to the above factors the ongoing expectations of a better global economic outlook in the coming months and the trends seen in several commodity and energy related markets.
FIGURE 1: Baltic Dry Index (BDI) – 1 Month up to March 3rd, 2021
[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]
FIGURE 2: Baltic Dry Index (BDI) – 1 Year up to March 3rd, 2021
[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]
FIGURE 3: Baltic Dry Index (BDI) – 5 Years up to March 3rd, 2021
[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]
The history though, taking into account the performance of the Baltic Dry Index over the past 5 years, shows that “super” markets cannot be a sustainable scenario. This can be due to many reasons that go beyond the scope of this note. Volatility will be always lurking and ready to play the role of the enemy of “a too good to be true” landscape for the shipping market. On the other hand, this can be strongly offset by the fact that global economic recovery in a more harmonized manner cannot be too far away and can become adequate fuel towards a good but not so “super” market for the shipping industry.
