The Baltic Dry Index, a measure of commodity-shipping costs, dropped the most in two months, as Easter disruption to grain exports and declining demand for shipments of iron ore and coal to Asia curbed vessel charters.
The index, which didn’t report on March 29 or April 1 because of the Easter holidays, slid 1.5 percent, the largest decline since Jan. 30, to 896, according to the London-based Baltic Exchange, an assessor of freight costs. The largest falls in hire costs were for Capesize vessels that carry iron ore and coal, and Panamax ships that typically carry grain cargoes, according to the exchange.
Average rates paid to hire Capesize vessels slumped 3.2 percent to $4,530 daily, while Panamax ships declined for a fourth session from a 10-month high on March 25, dropping 1.8 percent to $9,238 daily, exchange data show.
The declines extended a slump as the index averaged 796 in 2013’s first quarter, the lowest since the final three months of 1986, exchange data compiled by Bloomberg show, as an oversupply of vessels weighed on freight rates.
Last-quarter hire costs for the Capesize fleet, made up of 1,515 ships, averaged $6,058 daily, the lowest in records going back to 1999, according to the exchange and data compiled by Bloomberg. Fleet capacity has doubled in five years, amid record deliveries of new ships, data from London-based Clarkson Plc, the biggest shipbroker shows. Iron ore exports by sea grew from 842.1 million metric tons in 2008 to 1.11 billion tons last year, according to Clarkson.
Vessel charters declined as Easter holidays disrupted grain trading and iron ore demand in China, the biggest buyer of the material used in steelmaking, was under pressure, investment bank Morgan Stanley said in an e-mailed note April 1.
Single-voyage hires of Panamax vessels, the largest to transit the Panama Canal, are lower because of “weaker Indian demand for thermal coal both due to the Holi festival and the increasing stockpiles at Indian power plants,” according to the report.
India is the third-largest importer of thermal coal, used in power stations, according to government forecaster Australian Bureau of Resources and Energy Economics. China accounts for between 40 percent and 70 percent of global demand for most metals and mined commodities, Barclays Plc said in a January report.
Now the Easter break is over, rates for Supramax and Panamax vessel will stay at around $10,000 daily “for the next couple of months” because of “heavy loads” of grain cargoes, from South America, before falling again, Morgan Stanley said. Supramax vessels are about 25 percent smaller than Panamax ships and also used for grain cargoes, including soybeans.
“As newbuild deliveries for these asset classes are likely to match or even exceed last year’s, rates are expected to ease again as we enter the summer,” the bank said. Newbuild is an industry term for a newly-built ship.
Supramax average rates fell 1.1 percent to $9,753 daily, while Handysizes, the smallest tracked, were 0.7 percent lower at $8,055 daily, exchange data show.