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Monday, August 03, 2009

Baltic index stays weak, activity remains light

Monday, 03 August 2009

The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell 2.76 percent on Friday with weaker interest for cargoes weighing on activity. The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, fell 95 points to 3,350 points on Friday in a second day of falls after rising for three sessions previously.
Brokers said there had been a lack of fresh business for cargoes in past two days, dragging the index lower.
"Sentiment remained very fragile for the big ships with just a couple of days of quiet sending a shiver through the market," the Baltic Exchange said in its weekly market report. Brokers and analysts have said short-term movements of the main index continued to be dominated by the availability of the Capesize fleet, typically hauling 150,000 tonne cargoes such as iron ore and coal.
Chinese demand for iron ore -- the primary material in the manufacture of steel -- has driven freight market activity.
In recent months heavy congestion at China's ports tightened the supply of Capesize vessels and helped push the Baltic index higher but also added to swings in freight rates.
Port congestion in China as well as off Australia's coast had tied up a large number of Capesize vessels.
The Baltic's Capesize index .BACI dropped 3.58 percent on Friday, in a second day of falls, also reversing previous gains made earlier this week.
"There appeared a slowdown in Chinese imports from Australia, congestion unwinding at Chinese ports, newbuildings (new ships) coming out and with sufficient landed stocks and cargo still on the water, the market took on a softer tone," the Baltic Exchange report said.
The main sea freight index hit a more than eight-month high on June 3 of 4,291 but has been erratic since then.
"The volatility may well continue but the market looks reasonably underpinned at the current level in terms of the sentiment coming out from Q2 results," said Peter Ashworth, equity analyst with Charles Stanley Securities.
Dry bulk shipping company DryShips Inc reported better-than-expected quarterly earnings this week, partly helped by a recent rise in spot charter rates.
But concerns continue to grow over the rising number of ships set to hit the market this year, which is likely to weigh on freight rates given weak global appetite for commodities and an economic slowdown, analysts said.
"The supply side remains unclear in terms of the proportion of cancellations," said Charles Stanley's Ashworth.
"That is one of the long-term uncertainties which still overhangs sentiment towards the sector."

Source: Reuters