The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, rose for a fifth day on Friday as higher cargo bookings from China bolstered sentiment.

The index rose 3.7 percent, or 42 points, to 1,178 points. The index, which tracks the cost of shipping key commodities such as iron ore, cement, grain, coal and fertiliser, slid to its lowest level in two years last week.
“The positive momentum we have seen this week has been largely affected by a substantial increase in spot chartering activity, which was expected due to charterers returning to the market after Lunar New Year,” said Jeffrey Landsberg, managing director of dry bulk consultancy Commodore Research.

“A much larger amount of Chinese fixtures have come to the market during the last few days.”

Brokers said freight derivatives (FFAs) contract buying, especially on the smaller panamaxes, had added to the positive momentum this week.

India’s top court, which adjourned a hearing on Karnataka state’s ban on iron ore exports to April 4, has allowed traders to ship the ore cleared before the July ban, amounting to as much as 400,000 tonnes. Commodity analysts and trade officials said additional surplus in the market would not affect ore prices as the quantity allowed is too meagre.

Freight analysts said a full resumption of exports could bolster shipping activity from India.

The Baltic’s capesize index .BACI was 4.54 percent higher, with average daily earnings rising to $7,149 in a fourth day of gains. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
“Cargoes are being absorbed by spot/prompt ships, which have kept rate increases dampened. If, however, next week sees sustained demand, the backlog will begin to clear. This will pave the way for more pronounced firming,” Braemar Seascope said.

VOLATILE MARKETS

The Baltic’s panamax index .BPNI rose 3.38 percent, with average daily earnings rising to $12,971 in a seventh session of gains. Panamax vessels usually transport 60,000-70,000 tonne cargoes of coal and grains.
The Baltic’s main index has remained erratic since 2009 because of swings in Chinese demand for iron ore, the primary ingredient of steel.

“Any recovery in coal trade volumes into Q2 should be accompanied by an acceleration in iron ore trade and seasonal support from Latin American grain exports,” said Peter Norfolk, research director at broker FIS.
“Certainly recent movements in cape FFA prices have indicated renewed confidence in the potential for a rebound.”

China raised interest rates on Tuesday for the second time in just over six weeks, intensifying a battle against high inflation that threatens to unsettle global markets. Further monetary tightening could lead to a pullback in demand for ore, delivering another setback for shippers.

While there are indications of some vessel cancellations and delays, analysts expect deliveries to gather pace between 2011 and 2012.

“Fleet growth will continue to put pressure on freight rates over the medium-term future,” Commodore’s Landsberg said.