Baltic index rises, cargo enquiry improves

LONDON, Aug 17 (Reuters) - The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose on Tuesday as firmer enquiry on iron ore cargoes to China boosted sentiment on the larger capesize vessels.The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 1.09 percent, or 27 points, to 2,515 points in an ninth session of gains.

Brokers said freight activity had been driven by Chinese iron ore imports from Australia and Brazil on capesizes after Karnataka, India's second-largest ore producing state, banned exports from 10 of its ports in the past month.
"A lot of capes have been taken out of Brazil as Indian substitute business. That kick started the Brazilian trade, which has helped a lot," said Nigel Prentis, a director with HSBC Shipping Services Ltd.

"The cape market was totally oversold, so it is not entirely surprising to see it bouncing back."

The Baltic's capesize index .BACI rose 0.41 percent, with average capesize earnings rising to $30,084 a day after falling on Monday. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.

"While we continue to believe cape earnings will remain volatile going forward, seasonal demand and new iron ore contracts in the fall/winter should help drive rates higher later in the year," Deutsche Bank said in a note.

The Baltic's main index has been erratic this year, similar to 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.

The Baltic's panamax index .BPNI rose 1.28 percent with average daily earnings rising to $23,460.

Brokers said grain cargo activity in the Atlantic market, helped by Russia's grain export ban, had help buoy panamax rates in recent days.

"While grain exports should benefit the panamax and smaller vessels, growing iron ore and steel inventories in China may slow recent capesize gains," Deutsche Bank said.

More broadly, industry concerns about the pace of global economic recovery may hit shipping, given that about 90 percent of the world's traded goods by volume are transported by sea.

German investor morale fell in August to its lowest level since April 2009, pointing to a slowdown in Europe's largest economy but no risk of it or the broader euro zone falling back into recession. 

Analysts said freight rates also were expected to be dampened this year due to the pace at which new ships are set to enter the market in 2010 and 2011, despite indications of some vessel cancellations and delays.

(Editing by Jane Baird)

Source: Reuters Africa