Bloomberg News

Baltic Index Reaches Six-Week Low; Rents Drop on All 29 Routes

November 02, 2011

Nov. 2 (Bloomberg) -- The Baltic Dry Index, a measure of commodity shipping costs, fell to a six-week low as rents slid for all 29 routes and four vessel types tracked by the gauge.

The index dropped 2.8 percent to 1,859, the lowest level since Sept. 21, according to the London-based Baltic Exchange, which publishes freight rates. Hire costs for capesize ships that haul iron ore and coal, the biggest vessels in the index, declined for a sixth session, leaving them 25 percent below the 2011 high reached Oct. 25.

Steel prices in China slid for a second month in October, weighing on demand for iron ore, a raw material. The price of ore imported into the Chinese port of Tianjin plunged 31 percent last month, according to The Steel Index Ltd. Still, the slowdown that’s eroded rates is a “normal process,” according to Genco Shipping & Trading Ltd.

“The Chinese go in and they buy, then they pull back, and then they go back in,” John Wobensmith, chief financial officer at the New York-based company, said on a conference call today. Third-quarter net income plunged to $1.56 million from $36.2 million a year earlier, the owner of 53 dry-bulk vessels said yesterday.

There are no signs of slowing demand for coal hauled on dry-bulk vessels, with increased shipments expected as winter approaches, Wobensmith said. Imports of the commodity into China, the top global energy consumer, reached a record 19.1 million metric tons in September, customs figures show.

$24,125 a Day

Capesize hire costs fell 4.6 percent to $24,145 a day, exchange data showed. Rates were little changed in October after more than doubling in the prior two months.

Average daily rents for panamax ships climbed 16 percent from the prior month to $15,670 in October, the highest level since March, data compiled by Bloomberg showed. Increased ore and coal shipments boosted rates. Panamaxes carried 19 percent of all seaborne dry-bulk commodities in 2011’s first half, according to specialist transportation lender DVB Bank SE, with coal making up 59 percent of all panamax volumes.

Trading of freight derivatives indicates future hire costs lower than current prices for all four ship types in the index, according to data from Clarkson Securities Ltd., a unit of the world’s largest shipbroker.

Iron ore is a steelmaking raw material, and top global consumer China also is the world’s biggest steel producer. An estimated 63 percent of the 1 billion tons of the ore shipped by sea this year will go to the Asian country, UBS AG said in an Oct. 14 report.

Daily rents for panamaxes, the largest ships to navigate the Panama Canal, dropped 1.2 percent to $15,108, the lowest level since Oct. 6. Supramaxes, about 25 percent smaller, declined 1.7 percent to $15,533 and handysize ships, the smallest tracked by the index, fell 2.2 percent to $10,758.

--Editors: Dan Weeks, John Deane.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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