Baltic index softer, panamax pressure grows

The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, inched lower on Friday although further iron ore business provided support to the larger capesize market.


Brokers said fleet growth, especially in capesizes, was set to cap gains in the coming months.
The overall index fell 1 point to 1,423 points after rising for two sessions. Before the move higher, it had fallen for seven straight sessions.
"There has been quite a lot of ore fixing out of Australia in the last couple of days, which has helped the capes and a bit of period activity which has helped the big ships to stabilise," said Peter Norfolk, research director at freight broker FIS.
"The capes have stabilised whether or not that is a sign of something to come is too early to say as it's the end of the week."
The outlook for dry bulk rates has been 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.
There were also expectations that India's monsoon would reduce iron ore exports as rivers rise, hampering goods transportation.
The Baltic's capesize index .BACI rose 1.56 percent, with average daily earnings inching higher to $10,120. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
"There seems to be positive sentiment pulled over from the increase in rates in the Atlantic, although some still believe the Pacific is in for some tough times, with rumours of demand decreasing from China towards the end of June," said broker Braemar Seascope.
The Baltic's panamax index .BPNI fell 1.95 percent, with average daily earnings at $15,344. Earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, have more than halved since the same period last year.
Brokers said coal cargoes from Australia and Indonesia to China had provided some support to panamaxes in recent days although sentiment was turning negative.
Despite some optimism and improved rates in the Atlantic to begin the week, the market became nervous and rates wavered, the Baltic Exchange said in its weekly report.
Operators were watching for further signs that China's economy was slowing, given the dry freight market's dependence on Chinese imports, especially of coal and iron ore.
The index has more than halved in the past six months, nearing levels last seen during the financial crisis in 2008.
Credit Suisse cut Greek dry bulk carrier Diana Shipping to "underperform" from "outperform" and nearly halved its price target on the company's shares, saying supply in the dry bulk market was outpacing demand.
Source: Reuters