Dry Bulk Morning Report


The BDI has made history two days in a row.  Yesterday was the lowest the BDI has ever sank, and now today that record breaks as the index falls another 24 points. 

BDI = 608 (-24 points).

BCI = 679 (-46 pts) spot $6,707 Down $285.

BPI = 508 (-42 pts) spot $4,060 Down $332.

BSI = 585 (-14 pts) spot $6,119 Down $147.

BHSI = 340 (-8 pts) spot $5,141 Down $111.

Dry FFA:  A quiet day is normal in the paper world on a Friday.  It is quiet today.


Capes $8,500 (-100)

Pmax $6,820 (-50)

Soups $7,700 (-50)


Dry Bulk Morning Report

In Sync,

Dry Bulk:  The dry bulk funk goes on.  The report I get shows the changes to every route involved with the Baltic assessments on a daily basis.  For the second day in a row, every route of every index was down.  Synchronized sinking if you will.   Had a nice long phone call with a NY investor friend yesterday who indicated to me he had begun taking positions in the bulker equities.  He also has some tanker exposure he is selling at a profit and other maritime related equities.   The reason I share this with TMT is this fellow makes his money buying distressed assets, or put his way “catching the falling swords” and has done quite well for himself and family.  He is a hybrid market indicator of sentiment with inverse application.  We talked about the function of hope (sentiment) and I thought later about the saying that “hope is not an investment strategy” and how it truly can be.  My friend looks for the absence of hope or at least the lower side of hopelessness.  That is when he begins to buy.   Folks, he has begun buying bulker names.

BDI = 632 (-34 points).

BCI = 725 (-60 pts) spot $6,992 Down $364.

BPI = 550 (-70 pts) spot $4,392 Down $555.

BSI = 599 (-19 pts) spot $6,266 Down $200.

BHSI = 348 (-8 pts) spot $5,252 Down $119.


Dry FFA:  From Martin at FIS “Market levels are trading lower now on Cape/Pmx/Handy whil Smx touch softer. The Cape 4tc was -429 to 5972/day which is not very good so we saw levels start softer nearby with more pressure at the index. Expecting Pmx to be moderately lower while Smx/Handy may be slightly to moderately lower. Rumor of lower 2a fixture absoluting hurting Pmx, especially nearby on the March. Feb now trading down almost 7% on Capes, 4% lower on Pmx, 1.5% weaker on Smx, and flat on Handy.”


Maritime Numbers

Maritime Numbers:

The rates for VLCC’s originating in the AG >Far East are down 4.2% from yesterday but still at a respectable rate around $72,000 per day.  Last year the big ladies were at $34,500.  The Asian product tanker market continues to firm with daily rates for a LR-2 quoted around $28K.  The Atlantic basin MR market has come under pressure with triangulated earnings now quoted around $19.5K verses last week $26K.  The dry bulk funk continues to manifest.  Literally every route used to calculate the indices and BDI are down.  The BDI is at 666…an omen?


Dry Bulk Morning Report

Dry Bulk Funk Report,

No good news out of London for our bulkers.  All four components of the BDI have lower rates so of course the broader index is down as well.  The only route in all of the BDI that gained was C8 Gibraltor/HH trans Atlantic RV.  TMT alumni have been reading about the sad fact that we see no light at the end of this tunnel until the balance of ships to cargoes gets much tighter.  In 2014 we hauled more material than ever before but owners could not posture rates because of the tonnage overhang.  Torch Time!!!

BDI = 688 (-15 points).

BCI = 831 (-26 pts) spot $7,672 Down $131.

BPI = 648 (-21 pts) spot $5,175 Down $170.

BSI = 632 (-10 pts) spot $6,607 Down $108.

BHSI = 364 (-9 pts) spot $5,497 Down $133.

Dry FFA:  From Martin at FIS “Market levels are trading a little lower on Capes while Pmx/Smx/Handy are pretty flat vs yesterday, all on moderate interest and volume so far. The Cape 4tc posted -119 to 6631/day but we started off firmer stemming from good support in the Far East. Some chatter that big ore concerns still in the market sniffing around. Expecting Pmx/Smx/Handy to be slightly to moderately weaker. Feb-Mar is traing down 2% on Capes, and flattish on Pmx/Smx/Handy.”


Wet Shipping Update

From the Wet Side,

The big gas Queens VLGC continue to strengthen.  The Baltic assessment of spot rates along AG>Far East are up to around $80K per day.  Two weeks ago, the rate was at $48K.

Crude Tankers:

VLCC:  AG/Far East  $75,800.

VLCC:  WAfrica/China $70,100.

Suezmax:  WAfrica/Europe $42,600.

Suezmax:  Cross-Med $48,200.

Aframax:  AG/SE Asia $36,000.

Aframax:  Cross-Med $46,900.

Aframax:  North Sea $64,700.

Product Carriers:

Aframax LR2:  AG/Far East $23,800.

Panamax LR1:  AG/Far East $22,300.

Handymax MR:  Atlantic Basin $21,800.

Handymax MR:  Far East $19,200.

Gas Carriers:

LNGC 160K TFDE:  Worldwide $62,000.

LNGC 140K ST:  Worldwide $49,000.

VLGC:  AG/Far East $80,200.


Dry Bulk Morning Report

The Dry Bulk Funk,

We are starting the week on a sour note with all four component indices of the BDI down.  As a matter of fact every route in each asset class is down with the exception of a single Cape route C7 (Bolivar>Rotterdam). 

BDI = 703 (-17 points).

BCI = 857 (-30 pts) spot rates $7,803 Down $293.

BPI = 669 (-16 pts) spot $5,345 Down $120.

BSI = 642 (-8 pts) spot $6,715 Down $79.

BHSI = 373 (-7 pts) spot $5,630 Down $102.

Dry FFA:  Martin at FIS tells us “Cape levels are trading lower as early pressure was constant but now holding for the most part. The Cape 4tc came in -256 but market chatter questioning physical dynamics in both basins seemed to be the main motivation for sellers. Expecting Pmx/Smx/Handy to be slightly lower. Feb-Mar is trdin down 3.4% on Capes, slightly lower on Pmx/Smx, and flat on Handy.”


Analyst Notes

Long Time TMT friend Big Bear says to pass this along.

  • Dropdown Arbitrage—Does It Still Exist? One area we’ve been highlighting that could potentially outperform are the refining-sponsored logistics MLPs that have stable cash flows and visible growth tied to (in some cases) immense portfolios of MLP-qualifying assets at the sponsors. The recent volatility in the space got us thinking—does MLP dropdown math still work? Are some asset classes better/worse positioned than others for dropdowns?
  • Looking At Relative Valuations. To answer this question, we compiled a list of dropdown MLPs and their publicly traded c-corps and took a snapshot of their respective EV/EBITDA multiples. We excluded dropdown MLPs with private sponsors. The short answer is that the math still works; however, the value arbitrage has narrowed and the math could prove challenging for certain subgroups. Currently, the average spread in multiples between a dropdown MLP and its sponsor (see Exhibit 1) based on 2015 EV/EBITDA multiples is 7.3x compared to 9.0x just over 6 months ago.
  • Implications Of A Narrower Arbitrage. This likely means that MLPs and their sponsors might need to adjust dropdown multiples to generate sufficient accretion for the MLPs and/or achieve targeted growth rates. This is doubly true as cost of capital for the sector (in general) has increased. If not adjusted, dropdown MLP accretion would suffer and distribution growth would slow (on a relative basis), likely leading to multiple compression for the MLP. As we’ve highlighted in the past, not all sponsors are created equally. Consequently, we’d be watching very carefully as some sponsors will likely treat their MLPs better than others.
  • Is MLP’ization Over? A big driver of the growth of the MLP sector has been the MLP’ization of the energy space. Energy companies with qualifying assets have been creating MLP subsidiaries to arbitrage the valuation gap between the c-corp and the partnership and to create a general partner currency to unlock value for the entire enterprise. The narrowing of the spread (along with general MLP market volatility to state the obvious) could discourage further MLP’ization of assets embedded in c-corps.
  • Commodity-Driven Dropdown MLPs—Is The Model Broken? Among midstream MLPs, the group hardest hit by the oil downturn has been (not surprisingly) those partnerships with either direct commodity price exposure (e.g. processing) or volumetric sensitivity to higher-cost basins (e.g. the Bakken). While the math still works for a number of partnerships, growth could slow if sponsors do not adjust dropdown exchange values. But other MLPs (e.g. AMID, MEP, and SXE) have seen their equity values become impaired to the point that dropdown math becomes questionable. A number of the aforementioned dropdown MLPs are private-equity backed. The question is—what will private equity and other sponsors do? Will they adjust EBITDA multiples to generate accretion for the MLP? Will they be willing to take MLP units as consideration? (since many of these MLPs are unlikely or unable to issue public equity). Will they pause from doing dropdowns until the equity value of the MLP or commodity environment improves? There are likely to be multiple outcomes and creative financial solutions in the coming months.

Dry Bulk Morning Report

BDI is down 31 points 720

Disability hearing this morning.



Dry Bulk Mid-day

Hello TMT,

The good news in dry bulk equities is you don’t have to buy.  The bad news is you might not be in a position to sell.  Dam the luck.  We offer encouragement by the thought that when times get really tough, we will be here to assuage your fears.  It will get better but will take time.  I am sure your sick of hearing that, but I needed to put it out.  Just watch the NAV.  A friend of mine is moving back into bulker’s maybe a bit early but I have been wrong before.  Not last year as all 18 of my trades were in the money.  I believe it will take a lot of pain before the suffering eases.  Mike Webber is not the only Bear in town.

BDI = 751 (-19 points).

BCI = 965 (-6 pts) spot $8,799 Down $251.

BPI = 704 (-21 pts) spot $5,624 Down $163.

BSI = 659 (-14 pts) spot $6,895 Down $143.

BHSI = 392 (-10 pts) spot $5,092 Down $144.

Dry FFA:  Martin at FIS tells us “Market levels are traading lower this morning on Capes while Pmx/Smx are slightly softer. The Cape 4tc posted -150 to 7713/day, lower than folks expected and sellers were active, driving the q2 down to 9250 now. Expecing Pmx/Smx/Handy to be slightly softer. Feb-Mar is now trading down 14% on Capes, almost 3% weaker on Pmx, slightly softer on Smx, and flat on Handy.”


Early Bird Dry Bulk

It dont look good for today’s BDI.

Cape index down $150