Bloomberg News

Commodity-Ship Rates Have Worst Start to Year Since 1985

February 01, 2012

(Updates with researcher’s comments starting in third paragraph.)

Jan. 31 (Bloomberg) -- The Baltic Dry Index, a measure of shipping costs for commodities, fell for a 30th session in a row, rounding out the worst start to a year since the Baltic Exchange started publishing figures in 1985.

The index slid 3.1 percent to 680, leaving it down 61 percent in January, according to the London-based exchange. The measure is at the lowest level since Dec. 9, 2008.

Dry-bulk rents plunged as much as 80 percent this year as weather disrupted ports and yards delivered new ships, adding to an oversupply of vessels that haul raw materials such as iron ore. Rates also slid as steel prices stagnated in China, the biggest producer, according to Jeffrey Landsberg, managing director of Commodore Research and Consultancy in New York.

“When you combine those new ships with the way the Chinese steel industry is performing, you can see why January has been so hard,” Landsberg said by phone. Iron ore is an ingredient for making steel. Chinese output of the alloy slid for six months through November, World Steel Association figures show.

Returns are below operating costs on 16 of the 24 routes for which the exchange gives so-called time charter rates and are above break-even levels for only six voyages, figures from accounting firm Moore Stephens International LLP and investment bank Pareto Securities AS show.

Vessel Supply

More ships are available for hire after the end of China’s Lunar New Year holiday, further depressing rates, Fearnley Fonds ASA said in an e-mailed report today. Markets in the country, the largest global importer of seaborne minerals and grains, were shut last week because of the holiday.

Fearnley, an Oslo-based investment bank, cited optimism vessel supply will shorten and rates will hit bottom as resumed industrial activity in China feeds demand for cargoes.

Mitsui O.S.K. Lines Ltd., Japan’s largest shipowner, said today five of its 100 capesize dry-bulk vessels have no cargoes and are stopped. The company also predicted an annual loss exceeding its prior estimate by more than seven times.

Daily average returns for capesizes, the largest ships tracked by the index, slid 2 percent to $5,379, remaining at the lowest level since March, according to the exchange. Rates plunged 80 percent this month.

The three ship classes smaller than capesizes in the index are at or near three-year lows. Panamaxes, the largest vessels to navigate the Panama Canal, declined 5.4 percent to $5,759 and supramax ships about 25 percent smaller dropped 2.6 percent to $6,852, exchange data show.

Handysizes, the smallest vessels tracked by the index, fell 2.2 percent to $5,996.

--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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