Shipping Index Plunges Below 1,000 for First Time Since 2009
January 18, 2012, 4:05 AM ESTBy Michelle Wiese Bockmann
(Updates with Cantor Fitzgerald comments starting in ninth paragraph.)
Jan. 17 (Bloomberg) -- The Baltic Dry Index, a measure of commodity shipping costs, fell below 1,000 for the first time since January 2009 on signs Chinese demand for iron-ore cargoes is slowing, worsening a glut of vessels.
The index slid for a 20th session to 974, extending this year’s slump to 44 percent, data from the London-based Baltic Exchange show. Charter rates dropped for all four vessel types within the gauge, led by capesizes, which declined 8.3 percent.
Weaker demand for iron ore in China, the biggest consumer of the steelmaking raw material, is curbing vessel charters, said Kasper Moller, director of shipbroker Maersk Broker Asia. Capesizes, the largest vessels tracked by the index, represent about 40 percent of the global fleet of commodity carriers, estimates Clarkson Plc, the world’s largest shipbroker.
“If the Chinese market just takes its foot off the accelerator for a second, that has an immediate impact,” Moller said by phone from Beijing today. “We’re having a lot of new ships being delivered, too.”
China, the biggest source of global shipping demand, is slowing iron-ore imports before Lunar New Year holidays that start Jan. 23, Oslo-based RS Platou Markets AS said yesterday. Weather-related port disruptions curbed shipments from Australia and Brazil, while rains in Colombia and Indonesia have constrained coal exports.
More Vessels
The slowdown coincides with deliveries of new ships that are expanding more quickly than demand, according to Maersk Broker. Trade will swell 8 percent this year, compared with 12 percent for the fleet, it estimates.
Capesize returns slumped to $7,793 a day, the lowest since May 20 and 76 percent below last month’s 2011 high of $32,889, exchange data show. Panamaxes, the largest ships to navigate the Panama Canal, dropped 3.7 percent to a 33-month low of $9,257.
Supramax vessels, which carry about 25 percent less cargo than panamaxes, fell 2.3 percent to $9,695 a day, the lowest level since Feb. 6, 2009. Handysizes, the smallest ships in the index, retreated 1.3 percent to $7,581.
Reduced vessel hiring in the past two weeks will ease congestion and delays at unloading ports in China, depressing rates further, Natasha Boyden, a New York-based analyst at investment bank Cantor Fitzgerald, said in an e-mailed note. Shorter delays free more vessels to seek employment, according to the note.
Elevated Chinese iron-ore inventories and lower daily steel production in the country in December augur against “a bullish outlook in the near term” for the dry-bulk fleet, Boyden said.
Capesize rents on some routes fell below operating costs, estimated at $7,437 a day excluding fuel by London-based accounting firm Moore Stephens, according to the exchange. The rate to hire a capesize for a round trip in the Pacific Ocean slid 9.2 percent to $5,336 a day, and the equivalent cost in the Atlantic declined 15 percent to $6,795.
--Editors: Dan Weeks, Claudia Carpenter.
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
