Baltic index falling on softer enquiries from China
Tuesday, 28 Jul 2009
Reuters reported that the Baltic Exchange's main sea freight index BADI, which tracks rates to ship dry commodities, fell by 1.39% due to softer enquiry for iron ore from China and more ship availability. Chinese demand for iron ore has driven activity. In recent months heavy congestion at China's ports tightened the supply of Capsize vessels and helped push the main Baltic index higher but also added to swings in freight rates.
Mr Nigel Prentis director with HSBC Shipping Services Limited said that "It would appear there is slightly less demand for iron ore. That has brought the Capes off. But it seems very volatile; it's up one minute and down the next."
Port congestion in China as well as off Australia's coast has tied up a large number of Capsize vessels. Brokers said more available Capsize tonnage in the Atlantic had contributed to the easing of rates this week. Average earnings for Capsize vessels are still around USD 60,000 a day, which is strong despite subdued global demand for raw materials.
Broker Lorentzen & Stemoco said in a report that "Without doubt the Chinese stimulus package has been stronger and quicker than most have expected, contributing to recent market strength. However expectation is still for an easing of rates, the hardest question is when."
Mr Prentis said that "I'm quite surprised to see that the market is so resilient because we were expecting a taping off in iron ore demand in China. We are wondering how long this last can."
The index hit a more than eight month high on June 3rd 2009 of 4,291 but has been erratic since then.
