Baltic Dry index drops for 6th month

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Monday, 01 December 2008

The Baltic Dry index, a measure of shipping costs for commodities, retreated for a sixth-consecutive month in November as slowing economic growth cut demand for commodities including iron ore and coal to make steel. The index tracking transport costs on international trade routes fell 18 points, or 2.5 percent, to 715 points, according to the Baltic Exchange. The measure has fallen 94 percent from a record on May 20 and is at its lowest since January 6, 1987 “The main culprit is the perception of real economic slowdown, especially for China,” SIAS Research Pte Ltd. in Singapore said in a report. There’s “no quick recovery” and shippers of commodities such as iron ore and coal face an “onslaught of pessimism,” it said.
Slowing growth has forced commodity companies including Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, to cut output. China’s economy, growing at the slowest pace in five years during the third quarter, may slow further as demand for exports and consumer confidence weaken, the National Bureau of Statistics said on Thursday. The US economy, the world’s biggest, contracted during the quarter.
Concerns that shipping rates have been pushed down by a credit freeze may have been “overdone,” said Alex Gray, London-based chief executive officer of Clarkson Securities Ltd., a unit of the world’s biggest ship broker.
“Credit is there for a number of the more established, significant players,” Gray said in an interview yesterday. “Now we are hearing trade credit is not a huge issue and we just don’t have the cargo.”
Rates for so-called capesize ships that typically haul iron ore and coal fell 4.8 percent. They tumbled 31 percent this week to $2,425 a day, below the $6,000-a-day running costs, according to DnB NOR Markets ASA.
Investors bet rents will rebound to an average of $7,250 for the first quarter, forward freight agreement data from Oslo-based broker Imarex NOS ASA showed.
Rents of smaller panamaxes, the biggest vessels that fit through the locks on the Panama Canal, fell 4.7 percent for a weekly 30-percent decline to $5,021 a day. Forward freight agreements showed investors expect an average of $7,875 next quarter.
As Adapted from Bloomberg