Following a quite uninspiring second half of 2022, Baltic Dry Index stepped into the New Year with a rather tepid and lukewarm feeling. In fact, one should dig well into trading history in order to draw a parallel of the current steep downward correction of the spot market, with all segments being under severe pressure. In spite of that, our clients and friends replied to our annual sentiment survey that they remain “cautiously optimistic” for the next twelve months –or at least the majority of them. However, the second preferred reply was “rather pessimistic” for the first time in the last couple of years. Indicative of the prevailing rather negative sentiment is that “optimistic" or “cautiously optimistic” gathered 6 percent and 55 percent of the replies respectively - both lower year-on-year. In comparison to our last year survey, “optimistic” was chosen by 19 percent less market participants whereas the second more bullish option by circa 4 percent less. In sharp contrast, the percentage of the survey respondents believing in a “rather pessimistic” period increased from 15 percent to 39 percent since our 2022 sentiment survey.
Among other factors, the recent downswing of time-charter rates combining with anticipation of a softer global economic growth and increased uncertainty for the course of the postzero-Covid China painted the view of most of the respondents with less vivid colours. With the Baltic Dry Index currently lingering in the three digits, it would have been quite a surprise for the market sentiment to remain unaffected.
In particular, last year’s views for the expected average of the Baltic Dry Index for 2023 poised at the quite favourable range of 2000-2499 points, with circa one third of our friends ticking the aforementioned answer. Additionally, a generous and brave 43 percent voted for a 2023 average of more than 2500 points, with the remaining 28 percent picking the more bearish choice of less than 2000 points. Twelve months later though, market developments forced us to significantly change the proposed ranges. In the current juncture, 51 percent of the replies were in favour of a materially softer market, by picking the 1500-1999-point range.
Furthermore, another 37 percent were gathered around the 1001- 1499-point range, leaving just a small percentage in the highest ranges for the current trading year of above 2000 points. Some 84 percent of the replies don’t think that 2023 is going to have the potential to surpass the previous year average, let alone the impressive 2021 performance. A guestimation of the spot market balancing at 1622 points on average indicates that our friends and clients remain confident that the current trading year will be a profitable one, without extremely high expectations for the course of the Baltic indices though.
As far as the first half of 2023 goes, the vast majority is of the opinion that market has some depth, but not sufficient enough to push the Baltic Dry Index average above 1500 points. Looking forward into the second half of the year, a much better trading environment is expected. China has entered 2023 with trepidation. While the abrupt end to the zeroCovid strategy has boosted market confidence towards better economic conditions ahead, it has also increased uncertainty and negatively affected trading activity so far. Many macro and commodity analysts perceived the current juncture as the darkest hours of China’s economy before the dawn. With the situation still very fluid, any forecasts need to be constantly revisited as conditions evolve.
In terms of the specific segments, Capesizes and Panamaxes are the most desirable sizes of this survey, with the former gathering one third of the replies and the latter 23.5 percent of them. The rest 43 percent was equally shared in the two geared segments. Following a period with the BHSI TC and BSI TC averages directly competing and challenging in most of the times the respective averages of the largest bulkers, the workhorses of the sector have seen their daily hires heading south in the trailing six months.
Against this backdrop, the more volatile gearless segments are believed to have better chances for a quick positive reaction. As a final note and while trying to quantify the terms “cautiously optimistic” and rather pessimistic”, 25.5 percent of the respondents feel that the market will have an average of 2,500 points or above some time in the next one to two years. At the same time, the vast majority was arguing that more time will be needed for such a mellow and sweet average. At this point, it is pretty rational to assume that as every shipbroking firm around the globe, Doric’s vote goes in favour of the former.
Data source: Doric