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Baltic's largest gain in 7 weeks |
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Monday, 16 November 2009 |
 The Baltic Dry Index, a measure of shipping costs for commodities, posted its biggest weekly advance in a seven-week streak on a 'tight' supply of capesize ships to haul coal and iron ore.
The index tracking transport costs on international trade routes rose
157 points, or 4 per cent, to 4,111 points yesterday, according to the
Baltic Exchange. That's the highest since June 3 and a 21 per cent
weekly gain. Rates to hire capesizes surged 31 per cent this week to
US$76,534 a day.
'The current tonnage situation remains tight, and with demand remaining
strong, there is no immediate sign of slowdown in the capesize market,'
Rikard Vabo and Lars Erich Nilsen, analysts with Oslo-based investment
bank Fearnley Fonds ASA, said in a note yesterday before the exchange
data were released.
Rates rose most, increasing 7.5 per cent, for capesizes on the route
from Western Australia to Qingdao in China, a benchmark for the
iron-ore trade. China is the biggest user of the steelmaking material,
which is the largest dry-bulk commodity hauled at sea. The country is
injecting 4 trillion yuan (S$812.13 billion) into its economy, boosting
public works and potentially driving up raw-material demand.
The iron-ore market should be undersupplied next year and in 2011,
Jason Fairclough, a London-based analyst with Bank of America Merrill
Lynch, said in a report dated yesterday. The market is 'significantly
tighter' than forecast at the beginning of the year, and China has been
the 'key surprise', he said.
Iron-ore stocks at Chinese ports have fallen to 65 million metric
tonnes as of yesterday, Omar Nokta, head of research at Dahlman Rose
& Co in New York, wrote in an emailed note. If that were confirmed,
it would be an eighth weekly decline in nine. 'We expect increased
iron-ore spot shipments over the past several weeks to begin to make
landfall in China in coming weeks,' Mr Nokta wrote. That may reverse
the inventory drop, he said.
Rates to hire capesizes will average US$49,500 daily in the first
quarter of 2010, according to forward freight agreement data from
Imarex ASA at 3.05pm in Oslo. That implies a 35 per cent slide from
current spot prices. FFAs are used to bet on or hedge against future
dry-bulk freight rates.
'People are factoring in fundamentals,' Jan Bagger, a director at
London-based Clarkson Securities Ltd, a unit of the world's biggest
shipbroker, said by phone yesterday. They now include a time when
China's iron-ore restocking is completed and also a 'decent size' fleet
of new vessels taking to the water, he said.
The dry-bulk fleet's capacity will rise 33 per cent by the end of 2010
to 597.2 million deadweight tonnes, according to estimates from Drewry
Shipping Consultants Ltd in London.
Source: Bloomberg
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