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Commodity Shipping Extends Worst Slide in Five Years on Surplus of Vessels
Commodity shipping costs measured by the Baltic Dry Index extended the longest decline in almost five years as a surplus of ships for hire overwhelmed demand.
The fleet capacity of vessels for dry bulk commodities, such as iron ore and coal, will expand 16 percent this year, according to estimates from Clarkson Research Services Ltd., part of the world’s biggest shipbroker. China’s imports of coal and iron ore fell in April and May, customs data show.
“We are at the moment finding ourselves with an over- tonnaged market,” Alex Gray, chief executive officer of Clarkson Securities Ltd. said in an interview today. There’s “lower demand than we have seen at any stage this year.”
The Baltic Dry index fell 55 points today, or 2.3 percent, to 2,351 points, the lowest since Oct. 1, according to the Baltic Exchange in London. That’s the 25th consecutive drop, the longest losing streak since August 2005. Shipping costs have dropped 22 percent this year.
Declines today were led by daily rates for panamax ships, the largest to navigate the Panama Canal. They fell 4.4 percent to $21,147 a day.
China’s manufacturing growth slowed for a second month, the government’s Purchasing Managers’ Index showed today. Materials- demand from China, the biggest consumer of coal, iron ore and copper, helped freight rates to quadruple last year.
‘Brutal’ Quarter
The third quarter could be “brutal” for the bulk-shipping market, Thomas Baldwin, an iron-ore, freight and steel trader with Deutsche Bank in London, said in a note yesterday.
“Owners aren’t chasing the market down for the moment but the sheer supply of tonnage may be too much for the market to take during anything less than the most robust of trading conditions,” he said.
Freight demand will increase by the equivalent of 634 vessels this year while supply will expand by 1,110 ships, according to Clarkson Research.
Coal and iron ore, raw materials to make steel or generate power, accounted for 54 percent of all dry-bulk goods carried at sea in the first quarter, according to estimates from Drewry Shipping Consultants in London.
Daily rates for capesizes, the biggest vessels tracked by the index and typically iron-ore carriers, fell 1.8 percent today to $23,807.
To contact the reporters on this story: Alistair Holloway in London at aholloway1@bloomberg.net. Alaric Nightingale in London at anightingal1@bloomberg.net
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