Baltic shipping index up on higher capesize rates

Thu Jun 28, 2012
By Koustav Samanta
June 28 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, rose on Thursday, as higher capesize rates offset the continued softer performance in the panamax segment.

The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertilizer, rose 6 points or 0.61 percent to 994 points.

The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, has fallen about 42.8 percent this year.

"Bunker prices have stabilized at lower levels and the freight market has seemed to have stabilized, with the exception of the Atlantic, which is dismal. The usual large operators have continued to turn over their fleets at stable rates," ship broker Fearnleys said in its weekly note.

The Baltic's capesize index climbed 2 points or 0.17 percent to 1,184 points.

"While Capesize rates could improve a lot in percentage terms, this would likely not do much to help the many distressed dry bulk companies," RS Platou Markets analyst Frode Morkedal said in a note to clients.

Average daily earnings for capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, were up $53 at $3,879.

Bids for spot iron ore cargoes remained weak and few on Thursday as sluggish steel prices in top market China gave mills less reason to stock up on 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.

The Baltic's panamax index fell 1.33 percent on Thursday, with average daily earnings down at $7,712.

Analysts said fewer cargoes out of the U.S. Gulf and South America with increased tonnage availability was hurting Panamax rates.

Earnings for panamaxes, which usually transport 60,000 to 70,000 tonne cargoes of coal or grains, have dropped about 41.3 percent this year.

"We maintain a modest view on dry bulk for 2012 and see Supra/Handymax increasing their relative and absolute performance within the dry bulk segments," Arctic Securities analyst Erik Nikolai Stavseth said in a note to clients.

Average daily earnings for handysize and supramax ships were up at $10,399 and $13,034, respectively.

"We believe the Handies are supported by the upcoming Black Sea grain boom while the Supramaxes are benefitting from higher volumes of coal from Indonesia to other Asia and strong demand from the South American soybean season," analyst Morkedal said.

(Additional reporting by Nallur Sethuraman in Bangalore)