Baltic index rises; trend
seen as positive for now
LONDON - The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, rose on Wednesday as active buying of freight derivatives contracts boosted sentiment.
But brokers said firmer iron ore physical buying was needed to sustain gains.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose1.03 percent, or 28 points, to 2,741 points.
Brokers said firmer manufacturing data in China and the United States drove the buying of freight derivatives contracts.
"The futures market is telling us that we will have a quite strong move up in the capesize spot index at the end of this week and next week," said Tor Svelland, head of commodities at Pareto Securities.
"We also saw partly good news from China and the US and the commodity markets are holding, so it looks like we are in for an upward trend right now rather than a move down."
The capesize market has seen volatile activity in recent weeks. A rally in August was driven by Chinese iron ore imports from Australia and Brazil on capesizes after Karnataka, India’s second-largest ore producing state, banned exports from 10 of its ports in July.
The Baltic’s capesize index rose 3.61 percent, with average capesize earnings up at $35,932 a day. Capesizes typically haul 150,000-ton cargoes such as iron ore and coal.
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.
"High steel inventories and lower than expected demand has put pressure on steel prices lately -- a situation that could curb interest for seaborne iron ore," Arctic Securities said.
The Baltic’s panamax index rose 0.17 percent, with average daily earnings rising to $23,757. The supramax index fell 1.79 percent. Brokers said expectation of firmer US grains export activity, helped by a Russian grain export ban, was providing some support to the smaller ships.
"We continue to believe that the Russian grain ban has had a positive impact on market sentiment ahead of any actual volume increase expected later this Fall," Deutsche Bank said.
Chinese manufacturing staged a moderate rebound in August after slowing for several months under the onslaught of government measures to rein in credit and deter property speculation.
"Today’s PMI supports a view of a softer landing in the Chinese economy, although it is questionable to what extent the PMI is a cursor for the path ahead for the Chinese economy," Arctic Securities said.
More broadly, industry concerns about the pace of global 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 at which new ships are set to enter the market in 2010 and 2011, despite indications of some vessel cancellations and delays. – Reuters