Baltic index rises, capesize recovery seen short-lived

Thu Jun 21, 2012
June 21 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, rose on Thursday as activity picked up for vessels carrying iron ore and coal.

The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, rose 6 points or 0.62 percent to 978 points.

Baltic's capesize index rose 7 points or 0.61 percent to 1,152 points.

"Volumes in both iron ore and coal are good, but there are just too many ships entering the market," said broker firm Fearnleys.

"Talks of major Japanese owners considering cold layup of parts of the fleet, is good news, but more will need to follow if the market is to improve."

Average daily earnings for capesizes, which usually transport 150,000 tonne cargoes such as iron ore and coal, rose $64 to $3,550.

Bids for spot iron ore cargoes rose further on Thursday, setting the benchmark rate on course for a tenth straight day of gains in its longest rally in seven months, on trade expectations that high steel output in China will support demand for the raw material.

Iron ore shipments account for around a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.

However, the outlook for capesizes remain clouded for the next few weeks as Chinese buyers remain cautious, adopting a wait and see policy, with declining Chinese steel prices yet to stabilize, RS Platou Markets analysts said in a note.

Rates for supramax vessels were up $227 at $12,207 and those for handysizes were up $78 at $10,189.

The Baltic's panamax index fell 1.83 percent to 1,073 points, with average daily earnings for panamaxes, which typically transport 60,000-70,000 tonne cargoes of coal or grains, down $156 to $8,543.

"Inquiry in the panamax market has been light recently with a few cargoes covering quietly. Downward pressure may be expected going forward," McQuilling Partners said in its market commentary.

The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, has fallen about 44 percent this year.

(Reporting by NR Sethuraman in Bangalore; editing by James Jukwey)