The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to over a four-month low on Wednesday.
The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to over a four-month low on Wednesday with a growing supply of ships and weak demand hurting sentiment. The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, fell 3.16 percent or 71 points to 2,175 points, recording its ninth straight fall and was at its lowest since May 6.
"To some extent, the slide reflects an increase in shipping capacity. But it also signals that demand for commodities -- especially in China -- is starting to wane," Capital Economics said in a report.
In recent months Chinese demand for iron ore -- the primary material in the manufacture of steel -- has dominated freight market activity while also adding to swings on the main index.
"Dry bulk rates continue to pull back," Dahlman Rose & Company said in a note.
"Iron ore bookings have slowed during the past 10 days, with an increased focus on domestic supplies in China, as spot iron ore prices there have risen."
Port congestion in China as well as off Australia had previously tied up a large number of Capesize vessels, typically hauling 150,000 tonne cargoes such as iron ore and coal. But queues off China have eased, taking its toll on Capesize rates.
The Baltic's Capesize index .BACI dropped 5.18 percent or 139 points on Wednesday and was at its lowest since May 5.
The main sea freight index hit a more than eight-month high on June 3 of 4,291 but has been erratic since then.
Brokers have said while there was a pick-up in appetite for iron ore from European buyers as well as in Japan, without stronger iron ore buying from China it would not be enough to bolster freight rates.
Concerns continue to grow over the rising number of new ships set to hit the market in the coming months despite indications of vessel cancellations and delays, analysts said.