Capesize Market Continues to Get Slaughtered as BDI Sinks Lower

The worst commodity shipping market in 26 years may persist next year as an oversupply of vessels continues to curb ship owners’ ability to boost charter rates, according to Clarkson Plc, the world’s largest shipbroker.

The Baltic Dry Index, a measure of transportation costs for cargoes from grain to iron ore, averaged 922 points so far in 2012. That would be the lowest since 1986, the bourse’s data show. The gauge’s last publishing day this year is Dec. 24.

“The market is going to be under pressure for next year but I don’t think we’re alone in that view,” Guy Campbell, Clarkson’s London-based head of dry bulk, said by phone today. He declined to forecast whether average rates next year will be higher or lower. “We still see the weight of tonnage coming into the market as being the main driver.”

Trade in ore, coal, grain and other bulk commodities will expand by 4 percent next year while the total fleet capacity will swell 7 percent, according to estimates from Clarkson’s research unit. The fleet of Capesize ships that haul the most iron ore will increase by 5 percent while demand for the steelmaking commodity will advance by 6 percent, it anticipates.

The Baltic Dry Index fell 1.7 percent today to 708 points, according to the Baltic Exchange. Capesize rates slumped 3.4 percent to $4,861 a day while Panamaxes, the largest to navigate the Panama Canal, fell 4.1 percent to $5,820. Smaller Supramaxes declined 0.3 percent to $7,690. Handysizes, the smallest tracked by the bourse, rose 0.2 percent to $6,572.

Rates may rally in the second and fourth quarters of 2013 because of seasonal demand for grain cargoes, Campbell said. The supply of new ships joining the fleet will expand in the first three months of next year, negating the effect of additional iron ore shipments, he said.

 -Alaric Nightingale, Copyright 2012 Bloomberg.