Baltic index up, capesize rates turn higher

Tue Jun 19, 2012
June 19 (Reuters) - The Baltic Exchange's main sea freight index tracking rates for ships carrying dry commodities rose on Tuesday as higher activity propped up freight rates in the overall dry bulk segment.

The overall index that reflects the daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels rose 16 points, or 1.71 percent, to 954 points, its highest since the end of May.

The Baltic Exchange's capesize index recovered from its 20-day losing streak, with daily earnings for capesize vessels, which typically transport 150,000 tonne cargoes such as iron ore and coal, up $43 at $3,420.

Analysts, however, said that a strong recovery in capesize rates is unlikely because the oversupply of tonnage and relatively weak Chinese iron ore chartering activity will keep rates under pressure.

"With limited room for a near-term recovery, even as slight recovery in Chinese restocking and steel/iron ore prices continues, we believe the loss-stricken Capesize owners are forced to consider the options of lay-ups/scrapping to restore any positive supply-demand balance or risk a washout summer ahead," RS Platou Markets analyst Rahul Kapoor said.

The Baltic's panamax index gained 8 points, or 0.74 percent, to 1,089 points, with average daily earnings rising to $8,668. Panamax vessels usually transport 60,000 to 70,000 tonne cargoes of coal or grains.

Average daily earnings for handysize and supramax ships were also up, at $9,926 and $11,626 respectively.

The improvement in panamax and supramax spot rates were driven largely by the increase in South American grain fixtures and Indonesian coal fixtures, Wells Fargo analyst Michael Webber pointed out.

Growing ship supply, which is outpacing commodity demand, is set to cap gains in dry bulk freight rates, with economic uncertainty and a slowdown in China also exerting pressure on rates.

"We continue to expect the weak rate environment and ongoing restructurings to weigh on the sector over the near to intermediate term," Webber said.

The overall index, which gauges the cost of shipping commodities including iron ore, coal and grain, has fallen more than 45 percent this year.

(Reporting by Soma Das in Bangalore; Editing by David Goodman)