Baltic index falls on low activity, China woes

Thu Jun 7, 2012
By Soma Das
June 7 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Thursday due to weakness in dry bulk shipments, while analysts said a rebound was unlikely in the near term.

The overall index, which reflects the daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels, fell 6 points or 0.68 percent to 872 points.

"Near-term outlook remains extremely clouded as volatility in global iron ore and thermal coal prices keeps buyers at bay and fearful of committing to shipments, depressing volumes and in turn fixture activity," RS Platou Markets analyst Rahul Kapoor said.

The Baltic's capesize index lost 1.6 percent to 1,232 points, continuing a downward decline as lingering concerns of an economic slowdown in top consumer China kept iron ore trades muted.

Shipments of iron ore, a raw material for steel, account for around a third of sea-borne volumes on the larger capesizes.

Rates for capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, were down $143 at $4,383.

"The rate is below operating expenses for the vessels, and we expect slow-steaming to be implemented in order to reduce fuel costs and lift earnings," Arctic Securities analyst Erik Nikolai Stavseth said.

Demand for imported iron ore in China has softened due to slowing domestic economic growth, although some steel producers have still been willing to buy cargoes to replenish inventories, according to commodities analysts.

Iron ore shipments to China from Australia's Port Hedland rose 17 percent to 17.42 million tonnes in May from the previous month, based on port data released on Thursday.

However, the outlook for iron ore looked gloomy, with Beijing ordering Chinese banks to clamp down on new lending to steel traders, further weighing on a sector that has racked up $400 billion in debt.

The lending curb seemed to be at odds with Beijing's previous pledges to speed up construction of infrastructure and stimulate its slowing economy.

The Baltic's panamax index fell 0.57 percent as activity levels remained muted in both the Atlantic and Pacific basins, with average daily earnings for panamaxes down $42 at $7,018.

The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, has fallen about 50 percent this year.

(Reporting by Soma Das in Bangalore, editing by Jane Baird)