WEEK38 - Dry Cargo Market “Highlights” – 17-September-2010 - 24-September-2010

This week was a purely red week, with some serious losses especially in the Cape size segment, followed closely by the Panamax and Supramax size segments. The Baltic Dry index had reached only a notch away from breaking the psychological barrier of 3,000 points, 2 weeks ago, and today has failed to sustain above the 2.5k barrier. It failed to continue its rise and is counting 10 consecutive falling days of Baltic Exchange sessions. In general, all 5 indices were “red” for week 38, with only the smaller sized Handymaxes to contain their losses.

This slowdown is partly attributed to once more the usual culprit named China that has continued to reduce their imports of iron/ore as domestic demand for steel is low. This week we had a short holiday in the Far East, with China, Taiwan, Japan and S. Korea being on a festive mode, business activity remained soft toned. We see a serious lack of cargoes in the market and as week 40 will be another holiday period (the Mid‐Autumn Festival) in China that will halt business activity from October 1st until the 7th of October, we feel that unless activity really picks up during week 39 (next week) in anticipation of the festive week when it is expected that most industries will cool‐down and reduce their output, then we may be heading… practically “headon” for another 2 weeks of serious reductions in seaborne trade. Topping on this, the Chinese Government’s decision that China needs to comply by year end by executing fully the 5 year
Energy reduction plan, that dictates shutdown of all excess energy consuming industries. A list of nearly 2000 industries and factories including steel mills, paper factories, and other heavy energy consuming old technology plants are scheduled to be shut down by end of September and ultimately by year end when the 5 year energy saving plan terminates. The Government had a scheme that started in 2005, whose objective and goal was to reduce energy consumption by as much as 20% by end of 2010. We don’t know how much this will affect the intake of iron/ore and ultimately affect the production of steel, but definitely a status quo change will take place and we will expect the coal intake to alter and the iron/ore quantities to be somewhat reduced. We should state here that the Chinese government’s goal for 2020 is to reduce excess Industrial energy consumption by up to 45%. This decision could lead to a further softening of the seaborne trade, mainly in the Cape and smaller Panamax vessels.

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WEEK38 DRY BULK WEEKLY REVIEW