The Baltic Exchange's chief sea freight index, which tracks rates to ship dry commodities, rose by 2 per cent to a four-month high.
The Baltic Exchange's chief sea freight index, which tracks rates to ship dry commodities, rose by 2 per cent to a four-month high on Friday. Traders said the recovery, largely linked to volatile Chinese-driven iron ore trade, could be short-lived. The index, which gauges prices to ship resources like iron ore, cement, grain, coal and fertiliser, went up to 2099 points, as of 1314 GMT, from 2057 points the previous day.
Brazilian mining giant Vale, the world's biggest iron ore producer, expects to ship a record quantity of 30 million tonnes of iron ore to China in the first quarter of 2009, it said on Friday.
'Demand in China is coming back beyond previous levels . . . China is helping cover a lot of weakness in other markets,' said Jose Carlos Martins, director of ferrous minerals.
The Baltic dry freight index, a leading indicator of economic vitality, hit four-month highs over a week ago before it started to fall. It began rising again on Tuesday.
Brokers said the fluctuation was expected because the index's movement was largely linked to the volatile China iron ore imports.
'Again, this is a volatile market, it could fall again,' said one broker.
Iron ore stocks at China's major ports fell 3 per cent to 58.13 million tonnes in the week to last Friday, Chinica Shipbuilders Ltd (Shanghai) said in a report.
The index rose to a record of 11,793 points last May but had plunged more than 90 per cent to 663 points by December as the economic downturn and fleet overcapacity took their toll.
However, Joel Crane, a commodities analyst at Deutsche Bank, said the recovery was linked to China's trade. He said the market was taking a break and therefore, the recovery in the index was 'a basing effect, not a phenomenal recovery'.
'After halting to a standstill last quarter, the recent recovery in the index is reflecting a 'normalisation' of trade,' Mr Crane told.
'I do think it is linked to China trade, but I would also note both trade and demand growth there has slowed significantly from the growth rates witnessed over the last 10 years,' he added.