Baltic index edges up, cargo enquiry stays weak

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2010

The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, edged higher on Tuesday, but brokers said the market needed to see stronger iron ore activity to sustain gains The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 0.04 percent, or 1 point, to 2,713 points. Rates were not published on Monday due to a public holiday in the UK.
"There is no direction today and people are just waiting to see where the market is heading," said Petter Rishovd, a commodity broker with Pareto Securities.
"I definitely see some upside potential in the capes and the rest of the market is fairly flat."
A recent rally earlier this month had been driven by Chinese iron ore imports from Australia and Brazil on capesizes after Karnataka, India's second-largest ore producing state, banned exports from 10 of its ports last month.
"We suggest the iron ore export ban in the Indian state of Karnataka gave a short-term boost to capesize ton-mile demand, but it remains to be seen how permanent it is as the Indian government rejected the demand of some states to ban ore exports," Cantor Fitzgerald said.
The Baltic's capesize index .BACI rose 1.94 percent, with average capesize earnings rising to $34,488 a day. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
"For the capesizes we can see some increases on the physical side," Pareto's Rishovd said.
"It looks more flattish to slightly down on the panamaxes as the supply of vessels seems a bit high at the moment compared with the amount of enquiry."
The Baltic's main index has been erratic this year, similar to 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
"Last week's low level of spot chartering activity is a cause for concern," Commodore Research said.
"Freight rates were able to remain relatively steady despite the decline but will likely be unable to hold steady this week if chartering activity does not increase."
The Baltic's panamax index .BPNI fell 0.94 percent, with average daily earnings falling to $23,712. The supramax index .BASI fell 2.04 percent.
More broadly, industry concerns about the pace of global recovery may hit shipping, given that about 90 percent of the world's traded goods by volume are transported by sea.
Wall Street erased initial losses and moved higher on Tuesday as a string of economic data helped relieve investor anxiety about the strength of the economic recovery.
Analysts said freight rates also were expected to be dampened this year due to the pace at which new ships are set to enter the market in 2010 and 2011, despite indications of some vessel cancellations and delays.
"We are in the thick of the dreaded second half of 2010, dreaded due to the massive amount of newbuildings that were pegged to be on the water during this time, but dry bulk freight rates are well above where a large part of the market had expected them to be," Commodore Research said.
"A steady supply of newbuilding deliveries continues to be delivered, however."

Source: Reuters