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The
Baltic Exchange’s main sea-freight index, which
tracks rates to ship dry commodities, fell
further on Thursday pressured by slower interest
for the larger capesize vessels.
The index, which gauges the cost of shipping
resources including iron ore, cement, grain,
coal and fertiliser, dropped 3.38% or 110 points
to 3,149 in a second session of falls.
“It’s a story of the capesize market being
weaker at the moment and some of the confidence
going there,” said Derek Langston, a director
with SSY Consultancy and Research.
Brokers said freight derivatives contract
selling had also weighed on the overall index.
Nevertheless, physical interest still remained
firm especially for the smaller panamax and
supramax ships.
Freight rates had mostly drifted lower in
December following the end of a three-week rally
on Nov 20, which had been driven by Chinese
appetite for iron ore and coal, growing port
congestion in China and Australia and tight ship
availability.
The current demand for capesize vessels, which
typically haul 150,000-tonne cargoes, was light
but analysts expect the sector to still dominate
activity this year.
The Baltic’s capesize index fell 10.09% on
Thursday and was at its lowest since Oct 14,
2008 with average capesize earnings dropping
US$5,083 to US$35,523.
During November’s rally, capesize earnings
reached close to their June 2009 peak of
US$93,197.
“Although our forecast remains for freight rates
to fall across the board in the near term, as a
result of increased net fleet growth and more
subdued ore trade to China, we forecast a period
of strength at the end of the first quarter when
China imports return, leveraged by port
congestion,” consultancy Maritime Strategies
International (MSI) said in a report.
Brokers said the cold weather in Europe and
China was bolstering demand for coal, while
India sought supplies due to insufficient
stocks. Panamaxes are also used to transport
coal.
The Baltic’s panamax index rose 1.6% on
Thursday, while the exchange’s supramax index
rose 2.41% helped by iron-ore exports from
India.
“We are seeing that the other main route for
seaborne iron-ore trade is the supramax route
from east India to China and is maintaining its
strength,” SSY’s Langston said. “So it does look
like there is more spot (cargoes) being moved
from India to China. Whereas the capesize routes
are quiet at the moment.”
Analysts and brokers expect the main index to
remain erratic this year as it did in 2009 due
to swings in demand from China for iron ore, the
primary material in the manufacture of steel.
Brokers said the freight market could weaken
further without stronger global demand for
commodities.
Analysts said freight rates could come under
pressure due to worries over the rising number
of new ships set to hit the market this year,
despite indications of some vessel cancellations
and delays.
“The accumulation of net fleet growth by
mid-year will see freight rates across all
segments fall even further by June, however,
losing between 15% and 30% of their March
value,” MSI said. — Reuters
Source: The STAR
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