The Baltic Dry Index, the main measure of commodity shipping costs, may jump 15 percent in 2010.
The Baltic Dry Index, the main measure of commodity shipping costs, may jump 15 percent in 2010, aided by a recovering global economy, said STX Pan Ocean Co. The gauge may climb to an average of 3,000 in 2010 from about 2,600 this year as volumes expand, led by China, said Lee Sang Jae, head of strategic planning at South Korea"s biggest bulk carrier. The index has more than quadrupled since the company said it had reached ?close to the bottom? in October last year.
China, the biggest user of iron ore, has imported a record amount of the steelmaking raw material this year as the government"s $586 billion stimulus package increased demand for commodities. The Baltic Dry Index surged almost fivefold this year, rebounding from a record 92 percent slump in 2008.
?The dry bulk market has been spearheaded by China the entire year and later in the year gained an additional boost from recovering economies in Europe and emerging Asia,? said Lee, whose company gets more than 90 percent of sales from shipping cargoes such as coal and iron ore. ?This trend will run into next year.?
Global dry bulk volumes may increase 5 percent to 7 percent next year from an estimated 3 billion metric tons this year, Lee said in an interview yesterday.
Economic growth in China may quicken to 9.1 percent next year from an estimated 8.3 percent this year, the government- backed Chinese Academy of Social Sciences said in its outlook published on Dec. 8. The world economy will grow 3.1 percent next year after a contraction of 1.1 percent, the International Monetary Fund forecast on Oct. 1.
China may report its first gain in exports in 13 months in November, a Bloomberg survey showed today. Exports expanded 1.4 percent in November from a year ago, according to the median estimate of 26 economists.
China takes up about 30 percent of total dry bulk trade, Lee said. ?Early this year, we thought there would be no market here,? he said. ?We never imagined that China would have this much impact.?
Rates to hire capesize vessels to haul commodities such as coal and iron ore may rise on stronger demand in the Atlantic and Pacific oceans, Oslo-based shipbroker and consultant Lorentzen & Stemoco said on Dec. 2.
Rents for the ships have traded near $60,000 a day, more than tripling from early January, led by China demand, according to data from Oslo broker Imarex NOS ASA. They averaged $39,112 a day this year. Capesize vessels account for 65 percent of the Baltic Dry Index.
?Freight rates are improving across the board,? Lee said. ?On the supply side, there"s concern that too many vessels will be delivered next year but the impact should be limited.?
Out of around 110 million deadweight tons of dry bulk carriers scheduled to be delivered worldwide next year, only about 50 million tons are expected to come into the market, Lee said. Supply this year was only 40 million tons out of a planned 70 million to be delivered, he said.
In a sign of improving bulk demand, STX"s operating earnings may swing to profit in the current quarter, Lee said, without giving figures. The company posted an operating loss of $18 million in the third quarter, compared with a profit of $148 million a year earlier.
STX Pan Ocean has avoided the worst of the collapse in rates as it operates 344 bulk ships now after returning chartered vessels following the global financial crisis. It had about 560 ships in 2008.
The company"s shares, which have gained 21 percent this year on the Korea Exchange after slumping 69 percent last year, dropped 1.7 percent to 11,400 won at 1:53 p.m. local time.