August 25, 2016 22:21 GMT
The Baltic Dry Index has surged this week, rallying above 700 points with a large 12-point gain on Thursday to hit 718 points, just a day earlier, the index climbed 14 points, the largest single day gain that the BDI had seen in months.
The BDI continued its advance on Thursday as recent coal import data from China supported the sentiment that 2016 could offer a strong finish for the BDI. Data released on Wednesday from the General Administration of Customs showed that China imported 9.31 million mt of thermal coal in July, rising 30.7% year on year and up 23.5% from June to the highest level since December 2014.
Thermal coal buyers have been increasing their purchases since April when the Chinese government implemented a policy to restrict domestic coal production. Now, with winter approaching, the demand to import coal to China could skyrocket as the country prepares to meet its peak demand coal burning season, and most of this imported coal is coming from Australia, resulting in an increased demand for BDI component ships to transport coal between the two nations. In July, coal shipments from Australia to China rose 16% year-over-year, and 43% from June.
After a bit of a lull in the summer, there is confidence that demand to ship goods ahead of winter will take off. The main commodities that could be stockpiled ahead of winter include iron ore and coal, and these two commodities are primarily transported via capesize ships. Right now, smaller BDI ships are also seeing strength to ship soft commodities but this demand could taper later in the year. While overall, iron ore and coal demand should support the BDI through this year, once winter hits there will likely be a lull and the BDI will see a correction. Last winter, the lull period sent BDI down to a record low of 290 points in February.
source: economiccalendar
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