Shipping Rates Rally Longest Since ’04 as BofA Sees Glut Ending

Shipping rates for Panamax vessels hauling grains rallied for the longest in more than eight years and Bank of America Corp. said a fleet glut that decimated earnings is diminishing.

Rates for the biggest vessels to navigate the Panama Canal gained 2.1 percent to $8,637 a day, the 20th consecutive increase, according to prices today from the Baltic Exchange, a London-based publisher of freight costs on more than 50 maritime routes. That was the longest streak since a run of 21 advances through Oct. 29, 2004.

Earnings for iron ore-carrying Capesize ships plunged 98 percent since rising to a record in 2008 after owners added the most capacity in history, according to data from the exchange and Clarkson Plc, the world’s largest shipbroker. Fleet growth peaked in 2011 while gains in coal and iron ore demand, along with improving South American grain harvests, will help to boost usage of vessels, Bank of America analysts led by Francisco Blanch in New York, said in a report today.

“We see a major shift in the sector next year, as demand growth once again outpaces fleet capacity additions and the oversupply in the market begins to shrink,” the analysts wrote. A more sustained rally will probably only happen in 2015 because of the surplus, they said.

The Baltic Dry Index, the exchange’s widest gauge of commodity freight costs, averaged 920 last year, its lowest since 1986.

The measure today climbed 2.5 percent to 789, its highest since Jan. 24, lifted by gains in all four of the main vessel classes it tracks. Rates for Capesizes added 1.2 percent to $4,262, the biggest gain in almost a month, ending 17 days of declines.

Supramaxes, about 25 percent smaller than Panamaxes, gained 2.1 percent to $8,554. Handysizes, the smallest ships in the index, increased 2.6 percent to $6,956, the highest level for the vessels since Jan. 29, figures from the bourse showed.

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