Baltic index rallies, capes at near 9-month high

Monday, 5 September 2011 00:00 - - {{hitsCtrl.values.hits}}

LONDON Reuters: - The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, rose to its highest in nearly eight months last week as a surge in coal and iron ore bookings on the larger capesizes bolstered sentiment and earnings.

Brokers said a growing ship glut was set to cap dry bulk freight rate gains in the coming months. The overall index rose 3.89 percent or 63 points to 1,682 points, in a second day of gains and was at its highest since Jan. 4. Before Wednesday’s rise it had fallen for three sessions. The index had hit a near seven-month high last month.

Brokers said firmer coal and iron exports from Australia had boosted the capesize market.

“The fixture activity accelerated in both basins with Pacific and Transatlantic round voyage rates seeing the maximum gains as charterers rushed to fix open cargoes,” RS Platou Markets said.

Fixture data on Reuters showed that the cost of hauling a tonne of iron ore from Australia to China rose to $10.30 a tonne after mining group Rio Tinto fixed a cargo at that level on Thursday, above the key $10.00 level and at its highest this year.

“With owners seeing the market recover quickly and push on to new recent highs, there is added confidence at present, backed up by plenty of fresh cargo,” broker Braemar Seascope said on Thursday. “W Australia/China is now rumoured to have fixed at S$11/tonne, with several charterers paying $10.90/tonne today.”

Earlier in August the index, which gauges the cost of shipping commodities including iron ore, coal and grain, dropped to its lowest in more than three months after falling for 18 consecutive sessions. It has remained erratic and has declined over 10 percent this year. “With such a rally witnessed in one month, since the upturn started on August 1, many players are expecting the market cool off over the next few days,” said broker Lorentzen & Stemoco. “However, the fundamentals appear strong for the rally to continue into the fourth quarter. Significantly, the market is driven by Japanese tender business, coming in response to the devastating earthquake and tsunami in April 2011.”

The Baltic’s capesize index rose 8.04 percent on Thursday, with average daily earnings jumping to $21,901 a day and at their highest since Dec. 21 last year. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.

The Baltic’s panamax index fell 0.25 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $13,009.

“The Panamax segment continues to struggle on weaker demand and limited fixture activity on lack of cargoes in the Atlantic/US Gulf and the market in the East was only marginally positive providing minor support,” RS Platou Markets said.

Worries over the health of the world economy have signalled more pain and even bankruptcies among dry bulk ship owners, who face a glut of new vessels ordered when times were good.