Baltic dry bulk freight index rose

According to news from London on September 1, the dry bulk freight index of the Baltic Trade Exchange increased on Wednesday, as buying activity on freight derivatives contracts boosted sentiment.

But brokers said the market needs more robust iron ore spot purchases to sustain the gains.

The Baltic dry bulk freight index rose 1.03% or 28 points to 2,741 points on Wednesday.

Brokers said that China and the United States have firmer manufacturing data, which has prompted buyers of freight derivatives contracts.

"The futures market tells us that there will be a very strong uptrend in the spot price index for the Capesize vessel from late this week to next week," said Tor Svelland, Pareto Securities' commodity director.

“We also see some good news from China and the United States, and the commodity market is doing well, so the current freight market is more inclined to go rather than decline.”

The Capesize market has been oscillating in recent weeks. The increase in August was driven by China's use of sea bream-type vessels to import iron ore from Australia and Brazil. Before that, Karnataka, India’s second largest iron ore producer, banned exports from 10 ports in July.

The Baltic's capesize index rose 3.61% on Wednesday and the average profit rose to US$35,932 per day.

The Baltic dry bulk freight index has been fluctuating sharply this year, as was the case in 2009, as China’s demand for iron ore fluctuates.

Commodore Research said that the lack of leasing activity last week was the problem.

Arctic Securities said that steel (4384, 36.00, 0.83%) stocks are high and demand is lower than expected, which has recently weighed on steel prices – a situation that will reduce iron ore trading interest in maritime transport.

The Baltic's panamax index freight rate rose 0.17% on Wednesday, and the average daily profit increased to US$23,757. The Baltic's supramax index fell 1.79%.

Brokers said that due to the ban on the export of grain from Russia, the US grain export transaction will provide more support for smaller ships.

More generally, 90% of the commodities traded globally are transported by sea, so brokers and analysts say that worries about the pace of global economic recovery may hurt the shipping market.

Analysts said that this year's shipping costs are expected to be under pressure as a large number of new ships will be launched in 2010 and 2011, although there are indications that part of the vessel construction has been cancelled and postponed.

Precious Shipping said that the dry bulk freight index will drop to near historical lows next year due to the influx of new ships into the market and weak iron ore demand in China.