After hitting a 25-year low of 647 on 3 February, the Baltic Dry Index (BDI) slowly recovered somewhat but in the past week or so the index has been bumping along the bottom. On 22 February 2012, the Baltic Dry Index (BDI) fell to 704 from 731 a week earlier on the back of sharply lower panamax rates. This year to date, the BDI is down 59% and lower global steel production and a bearish outlook for Chinese coal did little to improve the index over the past week.

The Baltic Panamax Index (BPI) fell 3.22% with average daily earnings for panamaxes falling to US$6971 on 22 February and further to 836, recording a 4TC average of US$6705. "There is definitely a weak downturn, particularly in the Atlantic, for the panamaxes," said Peter Norfolk, research director at freight broker FIS. This year, earnings for panamaxes have dropped 47%. "The panamax market in the Atlantic is really in need of the boost from the grain export volumes out of South America, which really have not been visible so far this year," Norfolk said.

Meanwhile, supramax and handysizes indexes performed better. The supramax index rose 0.16% to 641 and gained again on 24 February, rising to 662 with a 4TC average of US$6920, up US$157. The smaller handysize advanced 0.26% to 389.

As becomes clear from the above figures, freight rates continue to decline despite record cargoes reported by shipbrokers such as London-based Clarkson Plc. “The biggest problem is that the fleet is continuing to expand like there’s no tomorrow,” said Sverre Svenning, director of research at Fearnley Consultants AS, a unit of Oslo- based shipbroker Astrup Fearnley. “We’ve seen that the imbalance between demand and supply has just kept increasing.” His view is echoed by Deutsche Bank analyst Justin Yagerman: “Dry bulk rates continue to bounce around near the bottom as vessel availability outweighs demand."

Moreover, the view ahead offers little relief to ship owners. Freight rates are not expected to pick up until 2013-14. The fleet of dry-bulk commodity carriers will expend 14% this year, compared with a 3% in seaborne mineral and grain volumes, according to Clarkson. In January, ship yards delivered 146 dry-bulk carriers, an all-time high, said Svenning.

“The increase in seaborne traffic will not cover the rise in available tonnage over the coming years,” concurs Marvel. “Only an increase in scrapping of tonnage could alter this outlook. If the freight market continues in its present vein, this could happen although handy and handymax sizes will not suffer as much as their cape, panamax and supramax counterparts. In cases where the newbuild rate is very high and scrapping expectations are very low due to the age structure of the ships at a particular size (ie mainly young fleets), the fleet will increase in number, pushing down freight rates through higher availability.