Market developments

The dry cargo market was historically strong in 2007. Freight rates in all segments rose continuously until November, then fell slightly. The overall average of the Baltic Dry Index was 122% higher than the year-earlier level.

 

The positive trends in the spot market were seen clearly in the period market as well as in the value of used tonnage. The three-year T/C rate for Handymax bulkcarriers rose by 95% over the course of the year, while the value of a five year-old Handymax bulkcarrier rose by 76%.

 

The positive market development was primarily explained by a very strong 13% rise in demand (source: R.S. Platou). Approximately 7 percentage points of the increase was due to rising volumes and the rest to increased waiting times in ports and longer transport distances.

 

Once again, China was the deciding factor in demand, the country’s iron ore imports being particularly important. Total sea-based transportation of bulk commodities rose by 187 million tons to 2,996 million tons in 2007. Constituting approximately a quarter (787 million tons) of total volumes and almost 40% of the volume increase, iron ore is the single most important product. The important Chinese iron ore imports grew by 57 million tons to a total of 383 million tons. China’s iron ore imports thus make up approximately half of total global sea-based iron ore transports, and the increase in China’s iron ore imports alone constitutes almost a third of the total volume increase in global sea-based trading in bulk commodities. In the first half, India, an important supplier of iron ore to China, introduced an export tax on iron ore, which put a damper on China’s imports from India and heightened the country’s recent tendency to increasingly import iron ore from Brazil. This is assessed to have been a significant contributing factor to the overall demand for tonnage, particularly in the large vessel segments.

 

Coal, bauxite and grain transports also displayed positive developments. Moreover, internal coal transports from north to south along the Chinese coast grew at an almost explosive rate and are today assessed to amount to 4-500 million tons, which is transported in ever larger vessels – thus contributing to the demand for tonnage in NORDEN’s segments.

 

Exports of steel products and cement from China grew at steep rates, particularly in the first half, but receded towards the end of the year. This was mainly explained by the introduction of export-restricting measures on steel and lower US cement imports as a result of the weaker housing market/economy.

 

The fleet increase was assessed to be approximately 6.6% (source: R.S. Platou). At the beginning of the year, the shipyards had full order books for 2007 and were thus not able to increase deliveries, despite the high newbuilding prices.