Another reason prices are falling is the negative feedback loop from Chinese traders
The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry commodities, fell on Tuesday as rates for panamax vessels continued to slip.
The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, fell 5 points or 0.72 percent to 693 points.
The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, has fallen about 60 percent this year.
“Slack global demand for minerals and slowing exports of soybeans from South America, combined with continued high deliveries of new ships from yards, resulted in a widening gap between supply and demand,” RS Platou Markets analyst Frode Morkedal said in a monthly report on Monday.
The Baltic’s panamax index was down 28 points or 3.92 percent at 686 points.
Earnings for panamaxes, which usually transport 60,000 to 70,000 tonne cargoes of coal or grains, have fallen more than 58 percent this year.
The Baltic’s capesize index, however, rose 6 points or 0.51 percent to 1,186 points.
Average earnings for capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, was up $109 to $3,465 on Tuesday.
Shipments of iron ore account for about a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.
Steel futures in Shanghai sank to an all-time low on Tuesday, piling pressure on a global iron ore market reeling from a slump in demand from China, the world’s dominant consumer.
“We speculate that the current situation is a reflection of inventory depletions in China following a period of too high steel production and iron ore imports, and consequently prices are falling as inventories are drawn down,” RS Platou Markets analyst Herman Hildan said.
“Another reason prices are falling is the negative feedback loop from Chinese traders defaulting on contract cargoes, which forces the producers to sell at a discount in the oversupplied spot market.”
Iron ore prices are near their lowest level in three years after having lost more than a third of their value since early July.
Source: Reuters
