Baltic index rises to 8-month high
The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, rose to an eight-month high last Friday, driven by Chinese demand for goods.
The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, rose 5.94 per cent or 196 points to 3,494 points on Friday, hitting its highest level since Sept 29, 2008.
The index has posted successive 2009 highs for 12 straight sessions.
The Baltic's Capesize index, which tracks costs for vessels typically hauling 150,000 tonne cargoes such as iron ore, has also soared, rising 9.34 per cent on Friday and posting a fresh eight-month high.
Cheaper imports of iron ore have spurred demand, which has also led to congestion at Chinese ports, buoying freight rates further as the availability of Capesize vessels has tightened.
Analysts have estimated that over 80 Capesize ships are waiting off China to load - representing close to 10 per cent of the total Capesize fleet.
But analysts have questioned whether the rally can last as iron ore stockpiles in China have been rising while demand for steel remains sluggish. Shipping costs have also moved up.
Inventories at China's main ports have risen almost 30 per cent from 58 million tonnes to 75 million tonnes over the last three months, which has given momentum to the Baltic index's rally.
Stocks at China's two largest ports in the eastern province of Shandong are close to maximum capacity.
'Iron ore imports can't continue at the same pace,' said Maria Bitri, analyst with shipbroker Galbraiths. 'It just cannot be sustained. Freight levels will be impacted for the bigger Capesize vessels.'
An oversupply of vessels, weak global appetite for commodities and recession are all expected to temper any gains this year, analysts said.
The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, rose 5.94 per cent or 196 points to 3,494 points on Friday, hitting its highest level since Sept 29, 2008.
The index has posted successive 2009 highs for 12 straight sessions.
The Baltic's Capesize index, which tracks costs for vessels typically hauling 150,000 tonne cargoes such as iron ore, has also soared, rising 9.34 per cent on Friday and posting a fresh eight-month high.
Cheaper imports of iron ore have spurred demand, which has also led to congestion at Chinese ports, buoying freight rates further as the availability of Capesize vessels has tightened.
Analysts have estimated that over 80 Capesize ships are waiting off China to load - representing close to 10 per cent of the total Capesize fleet.
But analysts have questioned whether the rally can last as iron ore stockpiles in China have been rising while demand for steel remains sluggish. Shipping costs have also moved up.
Inventories at China's main ports have risen almost 30 per cent from 58 million tonnes to 75 million tonnes over the last three months, which has given momentum to the Baltic index's rally.
Stocks at China's two largest ports in the eastern province of Shandong are close to maximum capacity.
'Iron ore imports can't continue at the same pace,' said Maria Bitri, analyst with shipbroker Galbraiths. 'It just cannot be sustained. Freight levels will be impacted for the bigger Capesize vessels.'
An oversupply of vessels, weak global appetite for commodities and recession are all expected to temper any gains this year, analysts said.