Shipping Index Surges Most Since 2010 as Ore and Grains Climb

The Baltic Dry Index, a measure of commodity-shipping costs, had its biggest weekly gain since August 2010 as strengthening demand to haul cargoes from iron ore to grains lifted freight rates.

The gauge advanced 5.7 percent to 1,352 today, taking the weekly climb to 19 percent, data from the Baltic Exchange in London showed. Costs for all four ship types within the measure advanced this week, led by a 43 percent rally to $21,793 a day for Capesizes, the largest iron-ore carriers.

Increasing steel output in China is boosting demand for vessels delivering iron ore, a raw material for making the alloy, according to Dominic Meredith Hardy, an analyst at Galbraith’s Ltd., a London-based shipbroker. The Asian country is the biggest buyer of the ore. Global agricultural exports including soybeans and grains will rise to a near-record this year, the U.S. Department of Agriculture predicts.

“We’ve seen pretty large amounts of iron ore, coal, grains and mineral cargoes including nickel ore,” said Jeffrey Landsberg, the New York-based managing director of Commodore Research & Consultancy, an adviser to ship owners. “That’s helping freight rates across the board.”

Daily returns for Panamaxes, the biggest ships to navigate the Panama Canal, gained 6.3 percent to $8,158 today and 13 percent this week, the exchange data showed. Russian wheat exports are poised to rise because of the September harvest, increasing the supply of grain cargoes, according to Commodore.

Freight Swaps

Freight swaps used to bet on, or hedge, the cost of hiring Panamaxes in 2014 exceeded $10,000 a day for the first time this year, according to Clarkson Securities Ltd., a unit of Clarkson Plc, the world’s largest shipbroker. The contracts anticipate a rate of $10,125, 13 percent more than a week ago.

The 12-member Bloomberg Dry Bulk Shipping Index jumped 14 percent this week by 4:50 p.m. London time, set for the biggest weekly gain since April 2009, data compiled by Bloomberg show. Pacific Basin Shipping Ltd., with the gauge’s heaviest weighting, extended this year’s increase to 17 percent.

The Panamax fleet is still expanding more quickly than any other in the dry-bulk market, capping returns for owners, Commodore’s Landsberg said. Outstanding orders for new vessels at shipyards equate to 24 percent of the existing fleet, compared with 16 percent for Capesizes, according to data from IHS Maritime, a Coulsdon, England-based research company.

Global trade in iron ore will expand 6 percent to 1.17 billion metric tons this year, with China accounting for 66 percent of cargoes, Clarkson predicts. Shipping of dry-bulk commodities will rise 5 percent to 4.3 billion tons, the shipbroker estimates.

Ore Stockpiles

Charterers booked 36 vessels this week to ship iron ore to China, more than double the prior period’s 14 ships, according to Commodore. Inventories of iron ore at Chinese ports fell 22 percent from a year earlier to 76.9 million tons for the week ended Aug. 30, data from Shanghai Steelhome Information show.

Daily hire rates for Supramax vessels, the largest ships equipped with cranes, rose 0.7 percent to $10,027 today, according to the exchange. Handysizes, the smallest ships in the gauge, added 0.6 percent to $7,688.

“We are seeing strong demand for iron ore,” Meredith Hardy at Galbraith’s said by e-mail. “Expect this to continue into the fourth quarter, traditionally a strong season for Chinese iron-ore imports.”

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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