Baltic Index at 5-1/2-year High on Iron Ore Demand

The Baltic Exchange's main sea freight index rose on Thursday to its highest since December 2013, driven by demand for vessels shipping iron ore in the Atlantic, pushing capesize and panamax indices to multi-year highs.

The Baltic index, which tracks rates for ships ferrying dry bulk commodities, rose 3.2%, or 66 points, to 2,130, its highest since mid-December, 2013. The index has surged about 68% so far this year. The index extended gains for an eighth straight session, mainly driven by strong demand for vessels that ship iron ore from Brazil into China.

A restart of Vale SA's Brucutu mine in Brazil, which was shut in early February after a tailings dam burst, has prompted increased demand from the country. The capesize index rose 161 points, or 3.9%, to 4,256 points, its highest since December 2017.

Average daily earnings for capesizes, which typically transport 170,000 tonne-180,000 tonne cargoes such as iron ore and coal, rose $1,146 to $32,219. "Vale's big-style comeback on the Brazil/China run combined with markedly increasing transatlantic volumes make up the main driver (of capesizes)," ship broker Fearnleys said in a note.

"With a high number of Capes, Newcastlemaxes and Valemaxes going out of service for drydock/scrubber fitting, the following weeks/months are expected to see present climate maintained and further strengthened," Fearnleys said.

The panamax index rose 49 points, or 2.4%, to 2,134 points, its highest since December 2010. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, rose $392 to $17,053.

Tight spot market for capesize vessels has driven iron ore shippers to book panamax vessels, driving rates higher, analysts said. The supramax index edged 25 points higher to 953 points.

Reporting by Nallur Sethuraman