Baltic Dry Index Falls As Chinese Steel Fundamentals Show Weakness

Pouring molten steel, image (c) Shutterstock/zhu difeng

(Bloomberg) — The Baltic Dry Index, a gauge of costs to transport grains and minerals by sea, fell the most since Dec. 19 amid slowing charters of vessels to export iron ore, the biggest dry bulk commodity shipped by sea.

The index slid 2.1 percent to 877, figures from the Baltic Exchange in London showed today. Daily average returns for Capesizes, the largest ships in the index, slid for a fifth day, dropping 5.7 percent to $4,270. Panamaxes, the second-biggest vessel type, declined 2.2 percent, the most since Dec. 21, to $9,036 daily.

“Without improvement in near-term Chinese steel fundamentals, Capesize rates continue to fall,” New York-based Sam Margolin, vice president of Cowen Securities investment bank, said in an e-mailed note today. China is the biggest importer of iron ore, a steel-making ingredient.

From January to March the Baltic Dry Index recorded the lowest quarterly average since the final three months of 1986 amid an oversupply of vessels and slowing global demand for commodities that’s curbing freight rates.
The lack of vessels being chartered for single voyages to China is also beginning to weigh on rates for smaller carriers, Margolin said.

China’s steel reinforcement-bar spot price, which averaged the lowest last year since 2009, declined seven days in eight, reaching 3,630 yuan ($585) a metric ton, data from Beijing-based Antaike Information Development show.

Average rates for Supramax ships declined 1 percent to $9,656 daily, while Handysizes, the smallest, slid 1.1 percent to $7,970 daily.

– Dan Weeks and Michelle Wiese Bockmann, Copyright 2013 Bloomberg.