Lower Capesize Rates Weigh on Baltic Sea Freight Index

Posted by Michelle Howard March 7, 2018

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Wednesday, snapping five consecutive days of gains, as rates for capesize vessels slipped to their lowest in a month.

The overall index, which factors in rates for capesize, panamax, and supramax shipping vessels, slipped 21 points, or 1.73 percent, to 1,191 points.
"It's a very tight market now that you're coming off of the Chinese New year. Just a few additional cargoes pop up rates a couple of thousand dollars a day and a lack of those incremental cargoes will drive rates down; utilisation remains high. Rates are going to be pretty volatile over the next month or so," said Randy Giveans, analyst at Jefferies.
"However, for throughout 2018, we see sharp demand outpacing supply as underlying fundamentals continue to improve for this space."
The capesize index shed 92 points, or 5.8 percent, to 1,495 points, the lowest since Feb. 5.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $719 to $11,797.
Chinese steel futures fell almost 2 percent on Wednesday, after a key advocate for free trade in the U.S. government resigned, stoking worries Washington will proceed with steep tariffs that could risk a trade war.
The most-traded May iron ore contract on the Dalian Commodity Exchange ended 0.5 percent lower at 517.50 yuan a tonne, near a one-month low of 515.50 yuan touched earlier.
The impact, if any, on the shipping sector from the possible tariffs will be pretty minimal and are likely to weigh mostly on smaller vessel segments that take steel into U.S., Giveans said.
The panamax index, meanwhile, gained 25 points, or 1.64 percent, at 1,553 points, a peak since Dec. 19.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose $196 to $12,463.
The supramax index rose 7 points to 1,020 points.