Baltic index with support from FFA Market
LONDON, July 30 (Reuters) – The Baltic Exchange’s main sea freight index .BADI, which tracks rates to ship dry commodities, rose on Friday, helped by increases in cargo enquiries and freight derivatives contract buying.
But analysts said gains were likely to be modest until demand, which is largely driven by the iron ore market, picks up in the fourth quarter.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 1.29 percent, or 25 points, to 1,967 points in an 11th session of gains.
“The market has been further supported this week on the strength of robust Asian thermal coal demand, moderate global grain demand, and moderate Chinese iron ore demand,” said Jeffrey Landsberg, senior analyst with Commodore Research.
Brokers said the gains had been buoyed by buying of freight derivatives in recent days, especially on capesize contracts.
The Baltic’s capesize index .BACI rose 1.91 percent on Friday, with average capesize earnings rising to $14,965 a day. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
“The situation has been positive this week, although the atmosphere remains fragile due to uncertainty derived from the obvious scenario of lack of cargoes and an ever increasing oversupply of (capesize) ships,” Braemar Seascope said.
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.
Freight players said they were watching developments in India after the southern state of Karnataka, which accounts for about a fifth of total national production, banned the export of iron ore from 10 ports this week. [ID:nSGE66R0D3]
India’s junior finance minister said on Friday it would be premature to hike a tax on iron ore exports in a comment that promised temporary relief for miners and exporters of the commodity. [ID:nSGE66T0B7]
“Karnataka’s decision to ban iron ore exports from its ports will likely lead to an increase in ore shipments from Australia and Brazil,” Landsberg said.
“These shipments are normally exported on capesize vessels so the capesize market should receive more support.”
The Baltic’s panamax index .BPNI rose 1.94 percent with panamax average daily earnings rising to $21,155. The supramax index .BASI fell 0.23 percent.
“Although better conditions are generally expected in the second half of the year, the (panamax) market remains vulnerable to new fragility,” Braemar said, referring to new deliveries.
More broadly, industry concerns about the pace of global economic recovery may hit shipping, given that about 90 percent of the world’s traded goods by volume are transported by sea.
Analysts said freight rates also were expected to be dampened this year due to the pace of new ships set to enter the market in 2010 and 2011, despite indications of some vessel cancellations and delays.
“Even though cape rates are on the rise … their depressed state, compared with panamax, supramax, handysize rates, is showing that there is a severe overhang in capesize vessel availability,” Commodore’s Landsberg said.