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Shipping Index Surges Most Since 2010 as Ore, Grain Cargoes Rise

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The Baltic Dry Index, a measure of commodity-shipping costs, had the biggest weekly gain since August 2010 as strengthening demand to haul everything from iron ore to grains drove up freight rates.
The gauge advanced 5.7 percent to 1,352 points today, taking its advance this week to 19 percent, data from the Baltic Exchange in London show. Costs for the four ship types within the measure climbed, led by a 43 percent rally since Aug. 30 in iron-ore carrying Capesizes to $21,793 a day.
Increasing steel output in China is boosting demand for vessels delivering iron ore from which the alloy is made, according to Dominic Meredith Hardy, an analyst at Galbraith’s Ltd., a London-based shipbroker. The Asian country is the biggest buyer of the raw material. Global agricultural exports including soy and grains will rise to a near-record this year, the U.S. Department of Agriculture predicts.
“We’ve seen pretty large amounts of iron ore, coal, grains and mineral cargoes including nickel ore,” said Jeffrey Landsberg, the New York-based managing director of Commodore Research & Consultancy, an adviser to ship owners. “That’s helping freight rates across the board.”
Daily returns for Panamaxes, the biggest ships that can navigate the Panama Canal, gained 6.3 percent to $8,158 today and 13 percent this week, according to the exchange. Russian wheat exports are poised to rise because of the September harvest, increasing the supply of grain cargoes, according to Commodore.
Freight Swaps
Freight swaps to bet on, or hedge, the cost of hiring Panamaxes in 2014 exceeded $10,000 a day for the first time this year, according to Clarkson Securities Ltd., a unit of the world’s largest shipbroker. The contracts anticipate a rate of $10,125, 13 percent more than a week ago.
Rates for Supramaxes, the largest ships with cranes, rose 0.7 percent to $10,027. Handysizes, the smallest ships in the gauge, rose 0.6 percent to $7,688, exchange data show.
“We are seeing strong demand for iron ore,” Hardy said by e-mail. “Expect this to continue into the fourth quarter, traditionally a strong season for Chinese iron ore imports.”
Source: Bloomberg

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