The Baltic Exchange's main sea freight index rose by 13 points on Thursday to just below 3,000 as demand held firm at the beginning of the autumn hedging season in Europe and North America, traders said.
The index, which tracks rates to ship dry commodities including iron ore, cement, grain, coal and fertiliser, rose to 2,988 points in its ninth straight session of gains.
There was strong technical indication that the slight dip in late August may have been a technical bull-flag that historically occurs in late summer, just before many traders return from holidays and begin to hedge themselves for the upcoming winter.
"We are reiterating our expectation of stronger earnings in the Fall/Winter based on historic seasonal demand, the impact of the Russian grain ban (October and later) as well as expected lower quarterly iron ore contract rates which should spur increased steel production," Deutsche Bank said in an investor note this week.
Traders also said that the market was being supported by healthy volumes in the iron ore market.
The Baltic's main index has been erratic this year, as it was in 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
Recently, the improving economy in Europe, and Germany in particular, have helped lift the index.
The Baltic's capesize index dropped slightly on Thursday, shedding 0.17 percent or seven points to 4,017 points.
Despite this downward move, most sources said they still saw upward space for capesize as a result of rising demand in autumn.
The capesize market has seen volatile activity in recent weeks. A rally in August was 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 July.
The high court of Karnataka state will continue hearings this week on a case challenging the state-imposed ban on iron ore exports. Traders said the government may soften its stance and lift the ban.
The exchange's panamax index rose 1.11 percent (37 points) to 3,396 points.
"A positive trend was seen during this week, with rates climbing steadily," Fearnresearch said.
The supramax index was up 13 points and 0.64 percent to 2,036 points.
U.S. AND CHINESE CONCERNS
Despite the current optimism, some concerns remain as slowing global economic growth, especially in the U.S. and China, may hit shipping, given that about 90 percent of the world's traded goods by volume are transported by sea.
Major developed economies are poised for a marked slowdown in coming quarters, led by the United States, although another recession still looks unlikely, a Reuters poll showed.
Analysts said freight rates were expected to be dampened this year due to the pace at which new ships are set to enter the market this year and next, despite indications of some vessel cancellations and delays.
"We maintain our forecast for a correction in dry bulk earnings in Q1 11, when weaker demand and increased supply will drag the rates down," consultants MSI said.
"The six month delivery outlook is extremely challenging, with, for example, the capesize fleet forecast to increase by more than 10 percent by February."
Source: Reuters
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