The Baltic Dry Index, a measure of shipping costs for commodities, posted a third weekly drop as Chinese raw material demand weakened and new ships took to sea.
The Baltic Dry Index, a measure of shipping costs for commodities, posted a third weekly drop as Chinese raw material demand weakened and new ships took to sea. The index tracking transport costs on international trade routes retreated 66 points, or 2.6 per cent, to 2,468 points, according to the Baltic Exchange. That is a 10 per cent weekly slide. A decline in freight rates may be 'more sustained' than expected, Castalia Fund Management (UK) fund manager Philippe van den Abeele said.
'It's a double-negative whammy,' London-based Mr van den Abeele said. 'You have an acceleration of vessel deliveries along with a deceleration of lending and amount of basic raw materials going into China.'
Demand for raw materials in China has led freight rates to treble this year. The country's iron ore stockpiles have increased 24 per cent this year while domestic prices for hot rolled steel sheet have dropped 6.6 per cent this month. That may show declining demand for the metal and less demand for iron ore, potentially curbing imports of the material.
The fleet of dry bulk transporters will expand this year by 806 ships, or 14 per cent more deadweight tonnes, according to Drewry Shipping Consultants Ltd in London. The forecast does not include delays, scrapping or cancellations.
Rates to hire capesize ships that typically carry coal and iron ore fell 19 per cent this week to US$38,923 a day, the lowest since May 20. They will average US$31,875 during the fourth quarter, according to forward freight agreement (FFA) data from Imarex NOS ASA at 3.05 pm in Oslo. FFAs are used to bet on or hedge against future dry bulk freight rates.
Rents for smaller panamax-class vessels that compete for cargo and also haul grains fell 2 per cent to US$18,032 a day. They will average US$17,250 in the last three months of 2009, the FFA data showed.
Meanwhile, the cost to transport crude oil from the Caribbean to the US Gulf Coast on Aframax tankers fell 3.6 per cent as demand to charter ships fell.
'Modest activity in most segments has pushed rates back down after they had improved early this week,' Oslo-based shipbroker PF Bassoe AS said in a report last Friday.
Aframaxes last Friday were hired for an average of Worldscale 67.5 from WS 70 on Thursday, according to New York-based Poten & Partners and Houston's Lone Star, RS Platou. WS 67.5 is about US$538 a day after expenses, such as fuel and port fees, Poten said. Rates have gained 8 per cent in the last month.
General Maritime Corp, a US-based tanker owner, estimated its 2009 daily operating expenses for an Aframax tanker at US$8,150.
Ship owners were able to achieve higher rates earlier this week to help pay for increased bunker fuel prices, Mike Reardon, a Houston-based vice-president at freight derivatives broker Imarex ASA, said last Thursday.
Bunker fuel prices in Houston have more than doubled so far this year, and are up 16 per cent in August. The price for 380-centistoke bunkers in Houston rose US$14 to US$436.50 per tonne, as at 9.34 am in New York.
'With the chance of bad weather and uncertain bunkers, there is likely to be some fluctuation' in rates, broker Galbraith's said in a weekly report on Friday.
More than 40 per cent of US crude imports come from nearby countries, including Canada, Mexico and Venezuela, according to EA Gibson. The US consumes about one-quarter of the world's crude.
Worldscale points are a percentage of a nominal rate, or flat rate, for tanker shipments on various routes. Flat rates, quoted in US dollars a tonne, are revised annually by the Worldscale Association in London to reflect changing costs.