Sea freight index slides 2.5% to new one-month low
The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to its lowest in a month on Tuesday as slower trade weighed on sentiment.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.51 per cent, or 66 points, to 2,562 points, dropping for a seventh straight session and at its lowest since Aug 18.
'The reason behind the slowdown has been energy conservation measures which China has announced,' said Peter Norfolk, research director at broker FIS.
'They have told parts of industry including steel mills to cut production and that has had an impact on both the iron ore demand and the steam coal.' Mr Norfolk said the freight market could see another short-term rebound, but added that conditions remained 'fairly weak'.
Shippers continue to look for signs that the Chinese government will call on more steel mills to cut output further, which could reduce iron ore imports and pressure the dry bulk market.
The Baltic's main index has been erratic this year, as it was in 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
'A lack of clarity around Chinese steel production curtailments remains an overhang, particularly given the volatility of steel prices. Other segments of the dry bulk market are flat,' Dahlman Rose & Co said.
The capesize market has seen volatile activity in recent weeks. A rally in August was driven by Chinese iron ore imports from Australia and Brazil on capesizes after Karnataka, India's second-largest ore producing state, banned exports from 10 of its ports in July.
'The dry bulk shipping market continues to soften, weighed down by few October cargoes,' Lorentzen & Stemoco said.
The Baltic's capesize index fell 4.16 per cent, with average capesize earnings falling to US$30,867. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
'With momentum currently working against ship owners, we expect (capesize) rates to soften towards US$25,000/day before finding a floor,' Arctic Securities said.
The Baltic's panamax index fell 0.72 per cent on Tuesday, with average daily earnings falling to US$23,144, while the supramax index fell 1.16 per cent.
Brokers said there were hopes that firmer US grains export activity, helped by a Russian grain export ban, would provide support to the smaller ships later this year.
Analysts said freight rates would be dampened this year by the pace at which new ships are set to enter the market this year and next, despite indications of some vessel cancellations and delays. The rise in fleet growth this year has not been matched by commodity demand.
'We believe that pressure on capesize rates is likely to continue another year given the continued high rate of delivery in the face of trend demand for major bulks like iron ore and coal,' Macquarie Securities said.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.51 per cent, or 66 points, to 2,562 points, dropping for a seventh straight session and at its lowest since Aug 18.
'The reason behind the slowdown has been energy conservation measures which China has announced,' said Peter Norfolk, research director at broker FIS.
'They have told parts of industry including steel mills to cut production and that has had an impact on both the iron ore demand and the steam coal.' Mr Norfolk said the freight market could see another short-term rebound, but added that conditions remained 'fairly weak'.
Shippers continue to look for signs that the Chinese government will call on more steel mills to cut output further, which could reduce iron ore imports and pressure the dry bulk market.
The Baltic's main index has been erratic this year, as it was in 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
'A lack of clarity around Chinese steel production curtailments remains an overhang, particularly given the volatility of steel prices. Other segments of the dry bulk market are flat,' Dahlman Rose & Co said.
The capesize market has seen volatile activity in recent weeks. A rally in August was driven by Chinese iron ore imports from Australia and Brazil on capesizes after Karnataka, India's second-largest ore producing state, banned exports from 10 of its ports in July.
'The dry bulk shipping market continues to soften, weighed down by few October cargoes,' Lorentzen & Stemoco said.
The Baltic's capesize index fell 4.16 per cent, with average capesize earnings falling to US$30,867. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
'With momentum currently working against ship owners, we expect (capesize) rates to soften towards US$25,000/day before finding a floor,' Arctic Securities said.
The Baltic's panamax index fell 0.72 per cent on Tuesday, with average daily earnings falling to US$23,144, while the supramax index fell 1.16 per cent.
Brokers said there were hopes that firmer US grains export activity, helped by a Russian grain export ban, would provide support to the smaller ships later this year.
Analysts said freight rates would be dampened this year by the pace at which new ships are set to enter the market this year and next, despite indications of some vessel cancellations and delays. The rise in fleet growth this year has not been matched by commodity demand.
'We believe that pressure on capesize rates is likely to continue another year given the continued high rate of delivery in the face of trend demand for major bulks like iron ore and coal,' Macquarie Securities said.
