Baltic index drops on ongoing capesize weakness

The Baltic Exchange's main sea freight index , which tracks rates to ship dry commodities, fell for a third straight session on Tuesday, driven mainly by weaker capesize rates.

The overall index fell 1.84 percent, or 26 points, to 1,411 points.
Capesize rates were down over 3 percent to 2,022 points. Average capesize daily earnings dropped $768 to $12,753. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
"The Pacific is looking pretty weak at the moment with Chinese demand low and monsoon slowing the market in India, and if the Atlantic slows then I think capesize will fall under 2,000 points soon," one freight trader said.
Ship brokers said that the only support for capsize rates currently comes from the western Australian iron ore market and from fairly healthy demand in the Atlantic basin.
"The West Australian iron ore market remains the bright spot (and) the Atlantic basin is also seeing a firmer market," Pareto ship brokers said in its weekly report.
Although freight rates have moved sideways for much of late spring and early summer, the overall index has fallen over 16 percent since January, and traders say the outlook for dry bulk rates remains grim because ship supply has outpaced demand to ship commodities.
The situation has been compounded by the deployment of a vessel owned by top iron ore producer Vale of Brazil, the first of the world's largest dry bulkers to enter the fleet.
Analysts said dry bulk freight rates were expected to remain subdued in July on the back of the Indian monsoon season, which will most likely reduce iron ore exports from India.
Also China may import lower volumes of iron ore due to its current high level of inventories.
Although it also fell on Tuesday, the Baltic's panama index continued to be supported by healthy trading in the Atlantic basin.
The index dropped 0.89 percent to 1,677 points, and average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, were down $121 to $13,398.
"The South American grain market remains the busy area, drawing ballasters both from the Far East and from the Continent," Pareto said.
Supramax rates were down 3 points, or 0.24 percent, to 1,270 points, and handymax remained unchanged at 698 points.
Source: Reuters