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Baltic index at near 5-month low, activity slow

The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.97 percent, or 56 points, to 1,830 points and was at its lowest since July 23. It has fallen over 15 percent and for 12 straight sessions since first dropping on Dec. 7.

Baltic index at near 5-month low, activity slow
23 December 2010 - 00:43

The Baltic Exchange’s main sea freight index .BADI, which tracks rates to ship dry commodities, fell to its lowest in almost five months on Wednesday as weather disruptions continue to hamper activity.

The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.97 percent, or 56 points, to 1,830 points and was at its lowest since July 23. It has fallen over 15 percent and for 12 straight sessions since first dropping on Dec. 7.

“As well as the usual pre-holiday slow down, seaborne trade volumes have been constrained by a variety of largely weather related factors such as force majeure declarations at coal mines in Queensland, Australia and exceptionally severe weather conditions in Colombia,” said Derek Langston, a director with SSY Consultancy.

The Baltic’s panamax index .BPNI fell 1.0 percent with average daily earnings falling to $14,938 and was at its lowest since May 2009. Panamax vessels usually transport between 60,000 and 70,000 tonne cargoes of coal and grains.

“With the lack of alternatives it has pushed up coal prices and simultaneously reduced availability of seaborne coal cargoes,” Langston said.

A cold snap in southern China and heavy rains in parts of Australia have disrupted operations at key ports, causing loading delays and long vessel queues. Further disruptions to Colombian coal shipments are expected due to weather delays.

Australia’s Dalrymple Bay Coal Terminal said on Wednesday it has resumed loading coal after shipments to the port were cut off due to supply interruptions.

The Baltic’s capesize index .BACI fell 4.58 percent on Wednesday, with average earnings slipping to $21,219.

“Whilst there has been anticipation in the market that a bottom would soon be reached, rates continue to drop,” broker Fearnleys said.

“Hopefully activity will be speed up early next year. However, as it looks right now, expectations remain poor.”

ORE ACTIVITY

Brokers said iron ore cargo activity had been hampered by restrictions on exports from India.

India’s largest iron ore producing state Orissa in the east has limited availability owing to a drive against illegal mining since last year, while the second largest state Karnataka in the south banned exports in July, citing its own drive against illegal mining.

The Baltic’s main index has been erratic

This year, as it was in 2009, because of swings in Chinese demand for iron ore. It reached a 2010 peak of over 4,200 points in May.

Analysts have said freight rates will be dampened in the coming months by the pace at which new ships are set to enter the market between 2010 and 2012, despite indications of some vessel cancellations and delays, known as slippages.

SSY’s Langston said the 200th capesize vessel was added to the global fleet in December compared with 112 new capes in the whole of 2009 and 43 in 2008.

“This contributes to net fleet growth this year of 75 million deadweight tonnes (dwt), which again marks a substantial step up in fleet growth from last year’s 38 million (dwt) gain and a 27 million (dwt) increase in 2008,” he said.

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