Dry-Bulk Shipping Demand Is ‘Meaningful,’ Baltic Says (Update1)
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By Alistair Holloway
Feb. 6 (Bloomberg) -- Costs to ship dry-bulk commodities, after doubling this
year, are climbing on “meaningful” demand, the Baltic Exchange’s top executive
said, cautioning that new vessels may cap gains in the year ahead.
“There’s meaningful demand in the short term, and that’s by comparison with the
collapse of last year,” Jeremy Penn, chief executive officer of the
London-based Baltic Exchange, said in a phone interview yesterday. The market
may weaken as new ships are delivered “over the next 12 to 24 months.”
The Baltic Dry Index, a benchmark for commodity-shipping costs, has more than
doubled since the end of December, the best start to a year since at least
1986. The measure dropped to its lowest level in more than two decades last
year, as slumping steel purchases and the global recession pushed vessel rents
below operating costs and owners anchored ships.
Vessel classes, from capesizes that haul 170,000 metric tons of cargo to
panamaxes that transport 70,000 tons, are powering the rebound on demand to
haul iron ore to China, the biggest consumer of the steelmaking raw material.
Stockpiles in the country have fallen 23 percent from a high in September and
producers abroad, faced with an oversupply of ore, may be shipping to China for
storage.
The index gained 9.6 percent today to 1,642 points, the 14th consecutive
advance and taking this year’s increase to 112 percent.
‘Short-Term Push’
Chinese steelmakers are “coming back into the market and buying,” Marius
Kloppers, chief executive officer of BHP Billiton Ltd., the world’s
third-largest iron-ore producer, said Feb. 4. The steel industry accounts for
almost half of all dry- bulk cargoes transported by sea, according to shipper
Golden Ocean Ltd.
“It’s a short-term push for a very depressed” freight market, Michael Gaylard,
a London-based strategic director at Freight Investor Services Ltd., said by
phone today. “I don’t see that this rally will maintain its momentum and push
through the year.” Rates may “steady from here,” he said.
New ship deliveries may damp charter rates. If all vessels on order for this
year and 2010 take to the water, the fleet would grow 42 percent by deadweight
tons, according to Drewry Shipping Consultants Ltd. in London. It cited the
order book at end-December.
‘Still Fussy’
Last year’s collapse of shipping markets led to contract defaults and forced at
least four companies, including Armada (Singapore) Pte to seek court protection
from creditors. Problems persist and charterers are “still pretty fussy” about
who they do business with, the exchange’s Penn said.
“The shipping market is still in a very difficult situation and there is going
to be a prolonged period of working out some of the problems,” he said.
About 50 capesizes aren’t getting any cargoes because traders are concerned
about the owners’ finances, Kjetil Sjuve, dry cargo department manager at
Oslo-based Lorentzen & Stemoco AS, said yesterday. Fifty ships are equal to
about 6 percent of the capesize fleet.
The Baltic Exchange is a members’ organization that provides shipping market
information and prices as well as settling disputes. It traces its history to
1744.
To contact the reporter on this story: Alistair Holloway in London at
ahollow...@bloomberg.net
Last Updated: February 6, 2009 09:05 EST
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