The overall index rose 58 points
The Baltic Exchange’s main sea freight index , which tracks rates to ship dry commodities, rose to its highest in nearly nine months on Friday after surging iron ore and coal export business to Asia sustained a rally in recent days.
Brokers said a growing ship glut was set to cap dry bulk freight rate gains in the coming months.
The overall index rose 3.45 percent or 58 points to 1,740 points, in a third day of gains and was at its highest since Dec. 24. Before Wednesday’s rise, it had fallen for three sessions. The index had hit a near seven-month high last month.
Brokers said firmer coal and iron exports from Australia to China had boosted the capesize market. Coal imports into Japan had also picked up, while freight derivatives contract buying had added further upside momentum on the larger capesize ships.
“Capesizes continue to be on fire as the tightness in Atlantic persists and ship owners becoming more confident. The boost seen in the Atlantic is having spill-over effects into the Pacific where Australian voyages to China are also inching higher,” said Arctic Securities analyst Erik Nikolai Stavseth.
“We think there is still upside to capesize rates as long as the basin-imbalance is in effect, but see the rate gains abating over the next weeks as ballasters will likely make an effort in getting in on the action.”
Earlier in August the index, which gauges the cost of shipping commodities including iron ore, coal and grain, dropped to its lowest in more than three months after falling for 18 consecutive sessions. It has remained erratic and is still over 30 percent down from the same period last year.
The Baltic’s capesize index rose 5.99 percent on Friday, with average daily earnings jumping to $23,899 a day and at their highest since Dec. 20 last year. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
“Five Capesize vessels were fixed to carry iron ore from Australia to China today at rates between $10.90/ton and $10.95/ton today, up from $10.10/ton-$10.30/ton yesterday,” said Dahlman Rose & Co.
Spot iron ore prices were steady on Friday, as miners held offers firm given an anticipated pick-up in Chinese steel demand as well as the continued tightness in supply from India, pushing up global indexes to nearly four-month highs.
Inventories of imported iron ore at major Chinese ports rose 0.5 percent to a record 95.59 million tonnes by the end of this week.
“(Capesize) rates do have the potential to keep pushing up and the mood of the spot market appeared to be transferring to the longer term with period inquiry evident and rates pushing up,” the Baltic Exchange said in its weekly report.
The Baltic’s panamax index rose 0.37 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $.
Worries over the health of the world economy have signalled more pain and even bankruptcies among dry bulk ship owners, who face a glut of new vessels ordered when times were good.
“From a fundamental point of view, the market is definitely going to come off — I can’t see any other alternative,” said Sverre Svenning, a director with broker Fearnley Consultants, pointing to the pace of ship deliveries.