Commodity Shipping Jumps to Highest This Year as Price Rout Spurs Demand
The cost of hauling coal, iron ore and grains by sea rose to its highest this year as a five-month rout in raw-material prices spurred demand from consumers seeking to build stockpiles.
The Baltic Dry Index, a measure of charter costs for four classes of vessel, gained 1.6 percent to 2,032 points today, according to the London-based Baltic Exchange, which publishes rates for more than 50 maritime routes. The gauge advanced to the highest since December. Daily returns on capesizes, the biggest component of the index, jumped 2.2 percent to $28,483, a sixfold increase from the end of February.
The Standard & Poor’s GSCI gauge of 24 commodities tipped into a bear market last month after dropping more than 20 percent, on mounting concern that slowing growth will erode the chances of shortages. The price of iron ore, the biggest commodity carried by ships in the Baltic Dry Index, fell 13 percent since February, based on prices in China, the largest consumer of the raw-material used to make steel.
“Gloom and doom makes key commodity prices go down which means the buying of those commodities is more attractive,” said Georgi Slavov, head of freight and basic resources research at ICAP Shipping International Ltd. in London. “The market was artificially depressed in the first half” as flooding shut mines from Australia to Brazil, he said.
Chinese imports of iron ore have increased for two consecutive months and to the highest since January, customs data show. The Asian nation, which accounts for about two in every five metric tons of global steel production, will expand 9.3 percent this year and 8.7 percent in 2012, according to the median of 10 economists’ estimates compiled by Bloomberg. China buys about 62 percent of all seaborne iron ore supply.
Quarterly forward freight agreements, traded by brokers and used to bet on future transport costs, jumped to the highest since February. The fourth-quarter contract is trading at $20,875, the highest since February, according to Clarkson Securities Ltd., a unit of the world’s largest shipbroker.
Growth prospects in the U.S., the world’s largest economy, may also be rebounding. Data this week may show U.S. retail sales increased in September at the fastest pace in six months, helping to ease concern the recovery is faltering.
Shipping rates advanced for all four vessel types that the Baltic Dry Index tracks. Panamaxes, the largest to navigate the Panama Canal, gained 1.5 percent to $15,561 a day. Smaller supramaxes rose 0.8 percent to $16,150 and handysizes added 1.5 percent to $11,435.
“Lower commodity prices are increasing global movement and seaborne demand for coal and iron-ore cargo,” Richard Lee, an iron-ore and freight trader at Barclays Capital in London, wrote in an e-mail. More cargoes means a decline in the supply of ships competing for business in the Atlantic Ocean, he said.
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