After a long slide, the Baltic Dry Index (BDI) seems to have hit the bottom and is slowly recovering from the lows seen this fiscal year so far. The index, which tracks transport costs on international trade routes for dry bulk commodities such as coal and iron ore, is known for its volatility. But the recent improvement is unlikely to lead to a sharp turnaround for the sector.

That’s because there isn’t enough demand to absorb the supply of ships hitting the market and the dry bulk shipping market is expected to remain muted for about two more years. “For dry bulk shipping, we have cut our BDI assumptions to 1,000 for 2012F (previously 1,200), 1,200 for 2013F (previously 1,300) and 1,300 for 2014F (previously 1,500)," Nomura Equity Research analysts wrote in a note on Tuesday.