The Baltic Dry Index (BDI) retreated yesterday following a plunge in forward freight contract rates, as shipping companies concluded the rally in the bulk shipping market was unsustainable.
The forward rate of the benchmark for the third quarter dropped 37 per cent to US$38,000 per day yesterday from US$60,000 three days ago.
The index itself, which tracks spot charter rates on various bulk ships, lost 4.6 per cent to 4,093 points on Thursday, ending 23 consecutive days of increases.
'The rationale here is, if a charterer can get a ship for US$38,000 per day for July delivery, why pay US$85,000 for spot delivery now?' Credit Suisse said in a statement yesterday.
Shares in bulk shipping companies dropped yesterday, tracking the BDI's downturn.
China Cosco Holdings, the world's biggest operator of bulk vessels, closed 4.33 per cent lower at HK$10.60. China Shipping Development slid 2.78 per cent to HK$11.20, while Pacific Basin fell 4.67 per cent to HK$5.51.
'BDI historically corrects sharply with major declines in futures, and current futures suggest BDI could fall to 2,900 points, implying 30 per cent downside,' Credit Suisse said.