Baltic sea freight index at record low as weak sentiment bites


The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, slumped to a new record low on Thursday as slowing activity, especially from China, took its toll.

The overall index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, fell 13 points, or 2.35 percent, to 540 points, marking an all-time low for which Baltic data is available that dates back to January 1985.

The index, known as the BDI, is also seen by investors as an indicator of global industrial activity.

“Pessimism is still prevailing across the dry bulk sector. Average rates for all sizes are now trading below OPEX (operating cost) levels, rendering owners exposed to substantial losses,” said Yannis Olziersky of Greek ship broker Intermodal.

“Apart from the existing tonnage surplus, for which we have talked a lot during the last years, anaemic global growth and demand for dry bulk commodities have also pushed the BDI to its lowest historical point.”

Low fuel costs, which make up part of freight calculations, have also contributed to the lower rate environment.

In one of the first casualties of the recent downturn, privately-owned shipping company Copenship said last week it had filed for bankruptcy in Copenhagen after losses in the dry bulk market.

Five dry bulk shipping firms, including shipping tycoon John Fredriksen’s Golden Ocean said this week they will form a new venture to coordinate chartering services, hoping to reduce costs in a fragmented market.

Brokers said the dry bulk market was expected to remain in the doldrums due to weak demand for commodities, particularly from top global importer China.

Weak demand for commodities such as iron ore has put pressure on smaller, higher-cost producers and this has taken its toll on the dry freight market.

“We suggest that the ongoing deceleration of China’s GDP growth, the primary driver behind the dry bulk sector, is taking a significant toll on the rate environment,” Natasha Boyden of boutique investment bank MLV & Co said.

“We expect 1H 2015 to be challenging.”

The capesize index, fell 48 points, or about 7 percent to 652 points on Thursday.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, dipped $381 to $6,358.

The panamax index, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, was up 20 points, or 4.26 percent, to 489 points. Average daily earnings for panamaxes, increased by $163 to $3,911.

The supramax index slipped 12 points to 496 points, and the handysize index fell 8 points to 273 points.

Source from : Reuters