Baltic Dry Index rises to 15-month high

Index has risen four times from the lows it hit in February this year


Scrapping of older ships and easing of overcapacity issues to some extent also aided shipping rates. Photo: AFP
Scrapping of older ships and easing of overcapacity issues to some extent also aided shipping rates. Photo: AFP

The Baltic Dry Index, which indicates the cost of moving major raw materials by sea, hit a 15-month high last week.

The index has risen four times from the lows it hit in February this year.

Apart from a low base effect, the improvement in demand for bulk commodities has led to its rise.

Iron ore restocking in China is said to have pushed the rates higher as well.

Scrapping of older ships and easing of overcapacity issues to some extent also aided shipping rates.

While analysts doubt if the recent spurt in bulk commodities will sustain, the index is still far lower from the highs it had seen in 2013.

Indian bonds buck global sell-off trend

While there has been a sell-off in global bonds after the results of the US elections were announced, Indian bonds have rallied thanks to the demonetization scheme.

Kotak Economic Research says, “The scheme and the consequent increase in banks’ deposit base is expected to boost SLR (statutory liquidity ratio) demand. Additionally, the immediate adverse impact on growth is expected to trigger steeper rate cuts in the following months.”

The yield on the benchmark 10-year government paper has fallen 47 basis points since the 8 November announcement.

After falling by 37 basis points till last Friday, it lost another 10 basis points on Monday and now stands at 6.33%.

Cement demand may be hit on demonetization

The Indian cement sector could see a 15-20% drop in demand until December 2016 and a subdued 3% growth in the fourth quarter of this fiscal year due to currency demonetization, said a recent Deutsche Bank Markets Research report.

Cautioning of short-term volatility in cement prices, it added, “To factor in revised demand-supply balance and its impact on prices, we lower our FY18E earnings per share (EPS) estimates by 5-29% across our coverage universe.”

READ MORE