Ship supply continues to grow
The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, rose for a third session on Monday although the market outlook remained bearish due to rising fleet supply.
The index rose 1.48 per cent or 20 points to 1,369 points.
Prior to the modest move higher, it had fallen for seven straight sessions.
‘The market has moved up a few points from a very low level,’ said Sverre Svenning, director of research at broker Fearnleys. ‘Ship supply continues to grow.’
The outlook for dry bulk rates has been grim because ship supply has outpaced demand to ship commodities.
There were also expectations that the onset of India’s monsoon in June would reduce iron ore exports as the country’s rivers rise, making it harder to transport goods.
Brokers said that they were monitoring the impact of flooding along the Mississippi River in the United States.
‘There remains concern that the flooding of the Mississippi could negatively impact the market, although no major effects have been seen yet,’ said Cantor Fitzgerald.
The Baltic’s capesize index rose 1.1 per cent, with average daily earnings rising to US$8,065. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
‘We suggest the positive sentiment was due primarily to a minor shortage of vessels in the Atlantic basin, although this is likely just a temporary change,’ Cantor Fitzgerald said.
‘Any ballasting of vessels in the Pacific could offset the rise. Furthermore, the period market has deteriorated further.’
The Baltic’s panamax index rose 2.7 per cent, with average daily earnings rising to US$13,724. Panamax vessels usually transport 60,000-70,000 tonne cargoes of coal or grains.
Brokers said that panamax activity remained slower with fewer cargo bookings.
‘Charterers are holding back now as they think rates have increased too much,’ Fearnleys’ Mr Svenning said.
Floods and cyclones in Australia in February had hit coal production, and some producers are still struggling to return to normal operations, hurting capesize activity.
Weather-related and logistics problems at Brazilian ports have also disrupted iron ore shipments from there.
Operators were also watching for further signs that China’s economy was slowing, given how dependent the dry freight market is on Chinese imports, especially of coal and iron ore.
Source: Reuters
