Baltic index stays close to 3-month low
The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, stayed close to a three-month low on Tuesday with weak appetite for cargoes keeping activity light.
The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, fell 2.45 per cent or 66 points to 2,623 points on Tuesday and was at its lowest since May 18.
The main sea freight index has fallen nearly 39 per cent since hitting a more than eight-month high on June 3 of 4,291.
'Fewer cargoes are appearing and we are seeing a build up of tonnage,' said Derek Langston, a director with SSY Consultancy and Research.
'The outlook in the immediate term looks a bit weaker,' he said.
In recent months, Chinese demand for iron ore - the primary material in the manufacture of steel - has driven freight market activity while also adding to swings on the main index.
China's iron ore imports raced to another record as steel production rebounded to a new high in July, with stimulus-induced demand allowing mills to maintain near-capacity output as they pass on rising ore costs.
Brokers said slower Chinese iron ore and coal demand in August have weighed on rates.
'We are in the summer period and we are just not seeing the amount of cargoes that are enough to keep rates where they are,' said Mr Langston.
Port congestion in China as well as off Australia's coast had tied up a large number of Capesize vessels, which typically haul 150,000 tonne cargoes such as iron ore and coal.
SSY said there were 47 Capesize vessels waiting to berth off China, down from 88 ships in mid June.
'On the Capesize market, you have a bit of a wait-and-see a situation going on where both charterers (shippers) and owners have just taken a step back from the market and are looking to see the direction the market is going to take,' Mr Langston said.
The Baltic's Capesize index dropped 1.36 per cent on Tuesday and was at its lowest since May 21.
Average Capesize earnings have fallen by over 53 per cent to US$44,315 per day since their June peak this year, with shippers able to push rates lower due to vessels becoming free.
'While the near-term impact on dry bulk shipping spot charter rates has been negative, we believe the strengthening demand for steel . . . is very much a positive development and view the current weakness as a necessary transitory period in the recovery of the broader dry bulk shipping market,' investment bank Jefferies & Company said in a report.
Concerns continue to grow over the rising number of new ships set to hit the market in the coming months.
'There has been a bit of an acceleration in new building deliveries which would obviously be a bearish factor going forward,' said SSY's Mr Langston.
The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, fell 2.45 per cent or 66 points to 2,623 points on Tuesday and was at its lowest since May 18.
The main sea freight index has fallen nearly 39 per cent since hitting a more than eight-month high on June 3 of 4,291.
'Fewer cargoes are appearing and we are seeing a build up of tonnage,' said Derek Langston, a director with SSY Consultancy and Research.
'The outlook in the immediate term looks a bit weaker,' he said.
In recent months, Chinese demand for iron ore - the primary material in the manufacture of steel - has driven freight market activity while also adding to swings on the main index.
China's iron ore imports raced to another record as steel production rebounded to a new high in July, with stimulus-induced demand allowing mills to maintain near-capacity output as they pass on rising ore costs.
Brokers said slower Chinese iron ore and coal demand in August have weighed on rates.
'We are in the summer period and we are just not seeing the amount of cargoes that are enough to keep rates where they are,' said Mr Langston.
Port congestion in China as well as off Australia's coast had tied up a large number of Capesize vessels, which typically haul 150,000 tonne cargoes such as iron ore and coal.
SSY said there were 47 Capesize vessels waiting to berth off China, down from 88 ships in mid June.
'On the Capesize market, you have a bit of a wait-and-see a situation going on where both charterers (shippers) and owners have just taken a step back from the market and are looking to see the direction the market is going to take,' Mr Langston said.
The Baltic's Capesize index dropped 1.36 per cent on Tuesday and was at its lowest since May 21.
Average Capesize earnings have fallen by over 53 per cent to US$44,315 per day since their June peak this year, with shippers able to push rates lower due to vessels becoming free.
'While the near-term impact on dry bulk shipping spot charter rates has been negative, we believe the strengthening demand for steel . . . is very much a positive development and view the current weakness as a necessary transitory period in the recovery of the broader dry bulk shipping market,' investment bank Jefferies & Company said in a report.
Concerns continue to grow over the rising number of new ships set to hit the market in the coming months.
'There has been a bit of an acceleration in new building deliveries which would obviously be a bearish factor going forward,' said SSY's Mr Langston.
