Baltic sea index up on panamax, capesize rates

Wed Apr 11, 2012
By Koustav Samanta
April 11 (Reuters) - The Baltic Exchange's main sea freight index tracking rates for ships carrying dry commodities rose on Wednesday, as Atlantic activity boosted panamax and capesize vessel rates.

The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, rose 16 points or 1.72 percent to 944 points.

"In the near term, dry bulk freight rates are expected to remain rangebound with a positive bias," brokerage ICICIdirect said in a note on Tuesday.

The brokerage said it expects the overall index to consolidate at current levels before resuming a gradual upward move, supported by higher demand for smaller vessels for trade of minor bulks and coal.

"However, over the longer term, freight rates are expected to remain weak due to the high level of Chinese iron ore inventory and significantly high fleet addition over the next two years."

The Baltic's panamax index gained 32 points or 3.08 percent to 1,072 points, with average daily earnings for panamaxes rising to $8,570. Panamaxes usually transport 60,000 to 70,000 tonne cargoes of coal or grains.

The Baltic's capesize index climbed 1.96 percent to 1,561 points.

However, earnings for capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, have fallen about 75 percent this year.

"A temporary reduction of export tariffs for Indian iron ore has resulted in a recovery in iron ore shipments from WC India to China over the last month," RS Platou Markets analyst Frode Morkedal said in a note to clients.

"This has been to the benefit for the medium sized tonnage in the Pacific. On the contrary, less iron ore export from Brazil to Asia has affected the Capesize segment negatively."

Growing ship supply has been outpacing commodity demand for quite sometime now and is widely expected to cap dry bulk freight rate gains in the coming months.

The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser has fallen about 46 percent this year.
 
(Reporting by Koustav Samanta in Bangalore; editing by Jason Neely)