Wed May 23, 2012
May 23(Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell on Wednesday due to falling activity in both capesize and panamax segments.
The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, fell 27 points or 2.3 9 percent to 1,100 points.
The Baltic's capesize index dropped 3.93 percent to 1,539 points. The average daily earnings for the larger capesize vessels, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $599 to $7,297.
Analysts said diminishing demand for steel in top consumer China and deferment of iron ore cargoes by cautious Chinese buyers has hit demand for larger capesize vessels.
"Market sentiment has weakened further with buyers adopting a wait and see policy," RS Platou Commodity Markets analyst Rahul Kapoor said in a note.
"Capesize activity fizzled out towards the end of last week and remains muted amid signs of buyers retreating from the spot market."
Although a state-backed newspaper has said that China would fast track approvals for infrastructure projects, investors are wondering whether that move alone would help counter falling demand from the property slowdown.
Moreover, sluggish demand, along with a supply glut brought by record daily crude steel production since March and falling rebar prices were expected to force mills in the world's No.1 steel producer, China, to pare back output in coming weeks.
The Baltic's panamax index fell 4.12 percent, with average daily earnings down to $9,456 due to low activity and a growing list of available ships in the Atlantic and Pacific basins.
"Owners are gradually willing to look at fronthaul as Atlantic is weakening. The indices have slowly been declining, but the general sentiment is even more bearish than the indices reflect," said broker firm Fearnleys in its weekly report.
"Despite more coal cargoes out of USG and USEC for direction India/Feast and the Continent, the number of ships is outnumbering the cargoes," it said.
Growing ship supply has been outpacing commodity demand for some time now, and is expected to cap dry bulk freight rate gains in the coming months.
The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, has fallen more than 27 percent this year.
(Reporting By Shruti Chaturvedi; Editing by Mike Nesbit)
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