Dry bulk rates will stay 'very low'

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Monday, 05 January 2009

The cost of shipping commodities such as iron ore and coal will stay "very low" this quarter after a record decline last year, said Fearnley Fonds ASA, an investment bank specialised in shipping. The Baltic Dry Index, a measure of commodity-shipping costs, fell 92 per cent last year as steelmakers cut output because of slumping demand from carmakers and builders. The steel industry accounts for almost half of all dry bulk trading, according to shipper Golden Ocean Group Ltd "We expect dry bulk rates to remain at very low levels in most of the first quarter, before various 'rescue packages' in China and the rest of the world should kick in and help improve parts of the construction industry," Oslo-based analyst Rikard Vabo said in a note.
"We could then see some improvement."
China, the world's biggest steelmaker, announced in November a US$590 billion (US$1=RM3.47) economic stimulus package running through 2010.
Gains in shipping rates will be curbed by a "large supply growth" of new ships, Vabo said