A slowdown in cargo demand took its toll
The Baltic Exchange’s main sea freight index , which tracks rates to ship dry commodities, fell to its lowest in more than three months on Monday as a slowdown in cargo demand took its toll at a time when there is a growing glut of ships.
“It’s more of the same. It’s a quiet market and rates are slipping,” said Peter Norfolk, research director at freight broker FIS. “It would not be surprising to see a quiet period at this time of the year. How long it lasts is hard to call.”
The overall index fell 0.63 percent or 8 points to 1,256 points in a 17th session of straight declines and was at its lowest since April 26. The index has stayed erratic in recent weeks and has declined over 25 percent this year.
“Once again capesize rates underperformed the sector this week as new cargoes were few and far between in both basins,” said Deutsche Bank.
The Baltic’s capesize index fell 0.63 percent with average daily earnings falling to $9,289 — falling below the psychological $10,000 a day for a third straight session. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal, have declined have fallen 12 percent in the past week.
“The capesize market continued to reverse course last week, as chartering activity, in general, slowed down,” Cantor Fitzgerald said.
“While the Pacific basin remained relatively busy, sentiment in the Atlantic has become more negative due to a lack of cargoes and the onslaught of vessels ballasting to the region.”
The Baltic’s panamax index fell 0.6 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $11,995.
Brokers said they were watching for further developments in China, which is facing its worst power shortages in years and likely to have an impact on dry freight activity.
“With Chinese authorities urging power plants to increase coal imports, we see the potential for a pickup in activity here going into the second half of 2011,” said Arctic Securities analyst Erik Nikolai Stavseth.
“High temperatures have sparked increased use of air conditioning in southern parts of China, lifting electricity demand.”
A week-long strike ended in South Africa’s coal sector on Monday after a wage deal was reached with employers, according to unions and the chamber of mines.
Brokers had said a prolonged coal strike by workers in South Africa, one of the world’s top five coal exporters and a key supplier to Atlantic and Pacific markets, could have a negative impact on the dry freight market, adding to the growing surplus of vessels and hitting trade volumes.
The main Baltic index has more than halved in the past six months, nearing levels last seen during the economic turmoil in 2008.
Uncertainty over prospects for the world economy could also potentially hurt demand for raw materials.