Baltic index firms; China rate rise a worry

Monday, 11 July 2011 00:00 - - {{hitsCtrl.values.hits}}

(Reuters): The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, rose for a second session on Wednesday as coal and iron ore cargo trades stayed firm.

The overall index rose 1.05 percent, or 15 points, to 1443. The index has stayed erratic in recent months, trading between 1,300 and 1,500 points.

Analyst said China’s third interest rate increase this year could hurt demand for raw materials.

“The more restrictive Chinese monetary policy could act as a headwind for raw commodity demand, which is already largely overwhelmed by the current supply of dry bulk tonnage,” Wells Fargo Securities analyst Michael Webber said.

The Baltic’s capesize index edged up 1.63 percent to 2116 points. Average daily earnings rose to $13,995. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.

“With average Cape rates at about $14,000 — Capes are more than covering their daily operating costs of about $8,000 — of course servicing the debt is another issue. Nevertheless Capes are at their highest levels since January,” Credit Suisse analyst Gregory Lewis said.

Brokers said iron ore fixtures had supported rates in the past two days.

“As most players were expecting a quiet summer market, the opposite is happening,” broker Fearnleys said in a report.

The Baltic’s panamax index rose 2.01 percent, with average daily earnings at $12,994. Earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, had been hit in recent weeks by slower business.

“With sluggish demand and an oversupplied market, we do not expect Panamax rates to gain much from these levels, although we would expect grain activities in the Atlantic to lend near term support,” RS Platou Markets said in a note.

The main Baltic index has more than halved in the past six months, nearing levels last seen during the financial crisis in 2008.