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Genco Shipping: No Commodities Rebound In Europe And Japan

Aug 20, 2009, 9:54 PM Genco Shipping’s (GNK) CFO John Wobensmith says we should expect higher volatility for the Baltic Dry Index (BDI) going forward. Yet he points out that the BDI alone shouldn’t be given too much credence as an economic indicator.

That’s because the BDI is just a snapshot of supply and demand tightness at any given day of the week. Given that cargo flows aren’t steady by nature, this means that the BDI can fluctuate without any long-term meaning. For example, China tends to “buy and pull back, buy and pull back”. We completely agree with his assessment.

The place to look for indicators is at the underlying demand trends of bulk shipping, which aren’t distorted by fleet supply changes as the BDI is.

On this, Mr. Wobensmith says that record numbers of iron ore shipments were moved over the last six months into China. This is because steel production in China is at record levels due to the country’s stimulus package and infrastructure development.

Nevertheless, demand from Japan and Europe has fallen 20-25% from normal levels and still hasn’t rebounded significantly. Despite this, Mr. Wobensmith believes the dry bulk industry has turned a corner.

See the full interview below for more on recent commodity demand trends.





china commodities economy europe japan markets moneygame-us transportation