Capesizes Gain Most in Month as Fleet Seen Absorbing Demand

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June 6, 2013

File photo of dry bulk ships

By Isaac Arnsdorf

June 6 (Bloomberg) — Rates to ship iron ore rose by the most in almost a month on speculation demand remains high even as a surplus of vessels keeps earnings below operating costs.

Daily earnings for Capesizes hauling about 160,000 metric tons of the commodity used to make steel gained 2.7 percent to $5,349, the biggest increase since May 7, according to the Baltic Exchange, the London-based publisher of shipping costs. That led the Baltic Dry Index, a broader gauge of raw materials shipping costs, up 0.6 percent to 806, figures showed today.

Capesize rates alternated between gains and losses this week. They’ve been below the $7,758 that Moore Stephens LLP, a London-based consultant, estimates they need to cover operating costs such as crew and maintenance for 109 out of 123 sessions this year, according to a Bloomberg calculation. The fleet will speed up to absorb increased demand, according to Erik Nikolai Stavseth, an Oslo-based analyst at Arctic Securities ASA.

“The market remains relatively soft,” Stavseth said in an e-mailed report today. “Any uptick in activity being met with slightly higher speeds is expected to keep markets subdued.”

The vessels’ speeds averaged 8.9 knots this month, compared with 10.7 three years ago, according to data compiled by Bloomberg. Sailing slower effectively reduces the excess capacity by making fewer ships available to load cargoes.

Rates for Panamaxes that carry about half as much cargo as Capesizes fell for the 31st day, extending the longest losing streak since 2001 as they declined 0.5 percent to $6,082 a day, according to the exchange. Supramaxes rose 0.6 percent to $9,250, and Handysizes, the smallest ship type tracked by the index, decreased 0.1 percent to $7,726, data show.

Copyright 2013 Bloomberg.

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