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Price Development

The importance of mitigating the price risk on freight gets evident when observing the volatile price environment of the freight market, indicated by the BDI (Baltic Dry Index). As illustrated in our first bulletin and market overview FREIGHT #01, in February of this year prices were on a historical low. Recent development has showed certain tendencies towards slightly recovering prices:

Supply & Demand Dynamics


Demand is strongly linked to the two main dry commodities: iron ore and coal. Major impact on the BDI and freight rates comes from those two commodities. Reduced economic growth in China, which is the biggest consumer of iron ore, has lead to a weakening demand and thus freight. As at today, stronger Chinese steel prices are having a positive impact on seaborne iron ore trade, which is reflected on rise in rates.


During the years of high demand of these same commodities, which was strongly linked to China, as well as on other commodities, many investors entered the shipping market and shipowning companies ordered new vessels. Enlarging their fleet, they thought of taking profit of the booming market. However, market crashed mid 2008 and rates plunged. A second wave of optimism evolved during 2012/13, as investors bet on a recovery of the market. China’s recent economic growth slow-down pushed rates against these expectations.


Years of low shipping rates as a result of oversupply (of mainly capesize and panamax), pushed a majority of shipowners into financial trouble. Situations of shipowners not being able to break-even, as vessel operating costs exceeded earnings, lead to increased scrapping of vessels, in order to prevent further losses.

Scrapping / Shipbreaking

In order to impede further collapse in freight rates, increasing the demolition rates of dry bulk carriers is key. This includes not only old and disused, but also younger vessels. Demolition age is usually dictated by the freight market. In times of increasingly low freight rates, demolition age of the vessels tends to get lower. Biggest scrapping nations are India, Bangladesh, Pakistan, China and Turkey; the first three countries (South Asia) accounting for over 60% in terms of gross weight. Demolition companies may pay up to several millions for a vessel, as the steel can be recycled and sold. Steel from scrapping activities covers an important part of Bangladeshi steel demand.

“Among the various dry bulk segments, the Panamax and Capesizes vessels were the main candidates for scrapping. More than 50 Panamax vessels adding up to about 4 million dwt and close to 50 Capesizes totaling 8 million dwt were scrapped during the first three months of 2016.

In the smaller segments, demolition has yet to gather pace, with only around 55 Supramax and Handysize vessels, totaling 2 million dwt, being scrapped over the same period.” (


Videos about Shipbreaking (in Bangladesh)


Where Ships Go to Die, Workers Risk Everything .                           Dangerous Work! Ship Graveyard in Bangladesh



The following graph (on the left) shows the demolition dynamics of dry bulk carriers, compared to global fleet evolution. The other graph (on the right) illustrates the average demolition age of dry bulk carriers. As explained before, a slightly more optimistic market environment in 2013 lead to less demolition in the following year:


Article Links

Baltic sea freight index rises to highest in over five months (Hellenic Shipping News)

Baltic index rises on firmer rates across vessels (Hellenic Shipping News)

Dry bulk demolition jumps in 2016 Q1 but scrapping age is key: sources


© by Cyrill Kressibucher / Pascal Perrin


BIMCO, 2016, Demolition age drops as the dry bulk market enters another challenging year [online]. [Accessed 21 April 2016]. Available from:
BLOOMBERG, 2016, BDIY Quote – Baltic Dry Index. [online]. 2016. [Accessed 21 April 2016]. Available from:
HELLENIC SHIPPING NEWS WORLDWIDE, 2016a, Baltic Sea Freight Index Rises To Highest In Over Five Months [online]. [Accessed 21 April 2016]. Available from:
HELLENIC SHIPPING NEWS WORLDWIDE, 2016b, Baltic Index Rises On Firmer Rates Across Vessels [online]. [Accessed 21 April 2016]. Available from:
HELLENIC SHIPPING NEWS WORLDWIDE, 2016c, Dry Bulk Demolition Jumps In 2016 Q1 But Scrapping Age Is Key: Sources [online]. [Accessed 21 April 2016]. Available from:
NGO SHIPBREAKING PLATFORM, 2015, NGO Shipbreaking Platform: Annual Report 2014 [online]. [Accessed 21 April 2016]. Available from:
NGO SHIPBREAKING PLATFORM, 2016, NGO Shipbreaking Platform » Press Release – NGO publishes 2015 list of all ships dismantled worldwide [online]. [Accessed 21 April 2016]. Available from:


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