August 21, 2012 / 3:37 PM / 5 years ago

Baltic index weighed by lower capesize rates

By Naveen Arul
    Aug 21 (Reuters) - The Baltic Exchange's main sea freight
index, used to measure rates for ships carrying dry
commodities, continued to fall on Tuesday due to lower capesize
rates.
    The main index, which factors in the average daily earnings
of capesize, panamax, supramax and handysize dry bulk transport
vessels, dropped 2 points to 709 points, a low last seen in
February this year.
    "To make matters worse, dry bulk scrapping is not keeping up
with forecasts, which, when combined with a weak demand
environment continues to put pressure on rates," Michael Webber,
analyst at Wells Fargo said in a note.
    The Baltic Exchange's capesize index slipped about
0.5 percent or 5 points to 1,082 points. The average daily
earnings for capesizes dipped $39 to $2,644 - its lowest this
year.
    "Capesize rates reached a four-year low...as more
newbuilding tonnage reached the already receding market faster
than expected," Webber said.
    Capesize activity was limited due to a holiday in Singapore,
RS Platou Markets analyst Frode Morkedal said.
    Capesize ships typically transport 150,000 tonne cargoes
such as iron ore and coal.
    Shipments of iron ore, a raw material in steel
manufacturing, account for about a third of seaborne volumes on
the larger capesizes, and brokers said price developments
remained a key factor for dry freight.
    China steel futures fell for a seventh consecutive session
to a record low on Tuesday, pressured by waning demand in the
world's top steel market that has thinned appetite for iron ore,
dragging it below $110 a tonne, a level last seen in 2009.
 
    Average daily earnings for handysize and supramax ships were
down to $7,015 and $8,709, respectively.
    The Baltic's panamax index climbed 1.71 percent to
833 points, a gain of 14 points. Average daily earnings for
panamaxes, which usually transport 60,000 to 70,000 tonne
cargoes of coal or grains, were up $115 to $6,631.
    Growing ship supply has been outpacing commodity demand for
some time and is widely expected to weigh on dry bulk freight
rates in the coming months.

 (Editing by Alison Birrane)

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