After the worse slide in dry bulk rates since the financial crisis, the question is has the three-month slide actually stopped? By George Lauriat, AJOTIs it really over? A long slide downward for the BDI (Baltic Dry Index – the principal shipping and trade index created by the London-based Baltic Exchange) began in late May and didn’t stop until mid-July. Over that period the BDI dropped from over 4000 to under 1700, before creeping back up to nearly 2000 at the end of July (The BDI high for 2010 was 4209 on May 26th and the low 1700 on July 15th). Now in the first week of August, the signs seem to point to a recovery, but is this false hope or movement based on economic fundamentals? The BDI is capable of rapid swings. And it will take a sustained rise in the BDI to reach the marks set in January. Consider that on January 1st the BDI was over 3000 and as of July 30th the BDI stood at 1967 off 1038 points. For example, the BDI high for 2010 was 4209 on May 26th and the low 1700 on July 15th, which shows just how dramatic the market moves can be. Steel The dry bulk freight market is a commodity driven business, leading with steel and steel producing commodities, along with other metallurgical, agricultural and extractive industries providing a bulk of the cargo. For this reason, as the world economy heats up, so does the demand for bulk ships. Equally, as the world economy slows, so does the need for bulk ships and the commodities they carry. Any increase in ships also takes its toll on charter rates. Steel is arguably the main market driver, and the BDI’s initial rise in 2010 and recent fall is reflected in supply and demand in steel and steel producing commodities. Recently, the American Iron and Steel Institute (AISI) reported (see Peter Buxbaum’s article) US steel imports in June fell to 1.8 million tons from a 16-month high of 2.1 million tons in May. This brings imports in the 2nd quarter of this year to 5.8 million tons, representing the highest quarterly total since the fourth quarter of 2008. This was a factor behind the rise in the BDI up until May. Total imports of finished steel in the first half increased by 14% from the same period last year to 8.3 million tons. Most of this increase in steel came from South Korea and Japan. Imports from Japan and Korea were up by 26% year-on-year to 1.4 million tons in the first half of 2010. However, shipments from China, which has been a point of contention among suppliers, fell by nearly 70% from a year earlier to 0.34 million tons in the first half, although this tally could radically change in the second half. In many key countries steel production was up in the first half. For example, according to the World Steel Association, Russian crude steel production was 5.8 million metric tons in May, nearly 25% higher than in May 2009, while the year to date total was 24% up at 27.2 million metric tons. Russian exports of steel in March exceeded 3 million metric tons, Russia largest monthly total since January 2007. There was also a general increase in exports to most regions. Iran remains Russia’s largest export market and took nearly 15% of total exports of steel in March. Italy was the next largest market taking 12% of the total in March, followed by Taiwan, Thailand and Germany. Half of Russia’s exports in March were billets and slabs, with hot rolled coil accounting for a further 20%. China, both as an importer and exporter of steel, is a prime contributor to the BDI. The National Bureau of Statistics of China noted that China’s steel production fell to a 4-month low of 53.8 million tons in June after hitting a record monthly volume of 56.1 million tons in May. Year-on-year growth fell sharply to 9% from over 20% in January-May, the lowest yearly increase since June 2009. However, steel output in the first half of 2010 hit 323.3 million tons, up 57.1 million tons or 21 percent above the corresponding period in 2009. According to the China Iron and Steel Association (CISA), daily crude s