Baltic index flat, world economy woes weigh

LONDON (Reuters): The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, was unchanged on Friday with sentiment knocked by worries over slowing economic growth and the pace of new vessel deliveries.

The overall index stayed flat at 1,268 points, having risen for two sessions previously. Prior to the modest move higher, it had fallen for 18 straight sessions previously. The index, which dropped to its lowest in over three months earlier this week, has been erratic and has declined over 25 percent this year.

Fears for the health of the world economy signal more pain and even bankruptcies among dry bulk ship owners who are getting rock-bottom rates to carry cargoes like coal and now face a glut of new vessels ordered when times were good.

“The wider financial turmoil is certainly not helping the dry bulk sector at the moment,” said Jeffrey Landsberg, managing director of dry bulk consultancy Commodore Research.

“While dry bulk is a market based primarily on commodity demand from developing economies like China and India, the turmoil going on in the financial space is creeping into the dry bulk market as well.”    

European leaders came under heavy pressure on Friday to take decisive action to stem a spiralling debt crisis while robust U.S. jobs data brought some relief to battered world markets.

“Capes and panamaxes will come under more real pressure from an ongoing glut of newbuilding deliveries however,” Landsberg said.“In the immediate future, though, the panamax market could find a bit of support. Chinese thermal coal demand remains strong and thermal coal imports remain very attractive.”  

Japan and China suspended some operations at several oil, dry bulk and container ports ahead of a powerful typhoon that could be one of the worst in the area for years.

 “Panamax port congestion is set to rise due to the approach of Typhoon Muifa,” Landsberg said.  “Vessels are no longer able to berth at Ningbo. Operations at Zhoushan and other (Chinese) ports have also been partially halted and may be fully suspended over the weekend.” India’s Supreme Court partially lifted an iron ore mining ban imposed last week in a key region of Karnataka state by allowing NMDC to mine up to 1 million tonnes per month of the steel-making ingredient from 6 August.

“A blanket ban would have not only significantly hurt the Indian steel industry, and iron ore miners, but would also result in a great deal of overall inflationary pressure in India,” Landsberg said. “It is not surprising, therefore, that the blanket ban has begun to be eased.”

The Baltic’s capesize index fell 0.17 percent. Nevertheless, average daily earnings inched higher to $10,117 a day. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal. The Baltic’s panamax index rose 0.2 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $11,798.

“With rumours that we have a sizeable amount of inbound ballasting tonnage coming into the market, we can expect (panamax) rates to come under increasing pressure in the near future,” broker Braemar Seascope said.

     Brokers said they were watching for further developments in China, facing its worst power shortages in years, which is likely to have an impact on dry freight activity.