Significant oversupply in the shipping market has contributed to the Baltic Dry Index (BDI) falling by 71.87 percent over the last two years, but Georgi Slavov, Managing director of freight and basic resources research at ICAP shipping told CNBC he believes market conditions will improve in the next few years.
“An extremely depressed market and low interest rates can inspire panic in the markets, companies failing on the way and of course it can also inspire renegotiation of contracts… that’s always a possibility,” Slavov explained.
“More and more people (find) the value of these assets more attractive these days, they came down in value in the last couple of years (and) when you take into account inflation, you will see that the value of the asset is very attractive and this makes a lot of people reconsider and eventually prepare to reinvest in the market again,” he added.
While commodities have recovered in recent years, the BDI has remained close to 20-year lows and signs of recovery in the U.S. and steady Chinese growth have not been reflected in the index.
“I don’t think all of these (things have) been priced in by the market, we certainly have supply issues which should be cleared in the next year or so, but the market hasn’t really reflected this better than expected import of raw materials into China and certainly the market hasn’t priced in the awakening of the US economy,” Slavov said.