The main global sea-freight index will nudge up in the first quarter from the current level as strong Chinese demand offsets pressure from an oversupply of vessels that has weighed on the market for the past year.
Industry experts polled by Reuters this month expected a small rebound in the benchmark index due to an anticipated rise in Chinese imports of iron ore and coal, the two main commodities in the dry bulk market by volume.
The median of the poll of 11 shipbrokers and analysts showed the Baltic Dry Index (BDI), an indicator of world economic activity, would average 2,118 points from January through March, up 2 per cent from Monday’s close of 2,076.
‘The biggest factor that will influence the dry market in the first three months of the year will be Chinese imports of iron ore,’ said Marius Magelie, analyst at Norwegian bank ABG Sundal Collier.
Bulk-shipping firms, which transport iron ore, coal, and other commodities, have struggled to recover from the global economic downturn with the Baltic Exchange’s dry index down more than 30 per cent so far this year.
Still, the rebound in the freight market was expected to be temporary as the arrival of new vessels pressures an already oversupplied market.
The industry’s forecast of 2,118 points was lower than the fourth quarter’s average so far of 2,439 points and the full-year 2010 average of 2,789, indicating the BDI would continue its downward trend.
‘The full weight of the new supplies will be felt in the second and third quarters, when things will be very, very bad for the industry,’ said Khalid Hashim, managing director of the Thai-listed firm Precious Shipping.
He believed the BDI could fall below 1,000 points in the second quarter. The index last dipped below that level in January 2009.
The increase in tonnage, which will include the rollout of the world’s largest dry bulk carriers by Brazilian mining giant Vale in the first half of 2011, was expected to choke off a recovery in the freight market for years.
The global dry bulk fleet was seen expanding by 11 per cent next year to 594 million deadweight tonnes, outpacing demand growth of 8 per cent, analysts said.
Chinese steel mills were expected to boost iron ore imports in 2011 as the government loosens caps on electricity use, imposed earlier this year to meet energy efficiency targets.
‘The biggest positive could come from China ramping up steel production with the lifting of the power restrictions that strangled production in the fourth quarter,’ said Janet Lewis, shipping analyst for Macquarie Securities.
Chinese iron ore imports were expected to rise as much as 10 per cent from a projected 620-630 million tonnes this year, traders and analysts said.
An unusually cold winter in China could also increase demand for foreign coal in the world’s second largest economy and support global freight rates.
‘Weather will be the most sensitive factor for the first quarter. A cold winter will increase coal demand and delay shipyard building capacity,’ said a senior dry bulk trader with a Chinese shipping company, who asked not to be named because he was not authorised to speak to the media.
Industry experts polled by Reuters this month expected a small rebound in the benchmark index due to an anticipated rise in Chinese imports of iron ore and coal, the two main commodities in the dry bulk market by volume.
The median of the poll of 11 shipbrokers and analysts showed the Baltic Dry Index (BDI), an indicator of world economic activity, would average 2,118 points from January through March, up 2 per cent from Monday’s close of 2,076.
‘The biggest factor that will influence the dry market in the first three months of the year will be Chinese imports of iron ore,’ said Marius Magelie, analyst at Norwegian bank ABG Sundal Collier.
Bulk-shipping firms, which transport iron ore, coal, and other commodities, have struggled to recover from the global economic downturn with the Baltic Exchange’s dry index down more than 30 per cent so far this year.
Still, the rebound in the freight market was expected to be temporary as the arrival of new vessels pressures an already oversupplied market.
The industry’s forecast of 2,118 points was lower than the fourth quarter’s average so far of 2,439 points and the full-year 2010 average of 2,789, indicating the BDI would continue its downward trend.
‘The full weight of the new supplies will be felt in the second and third quarters, when things will be very, very bad for the industry,’ said Khalid Hashim, managing director of the Thai-listed firm Precious Shipping.
He believed the BDI could fall below 1,000 points in the second quarter. The index last dipped below that level in January 2009.
The increase in tonnage, which will include the rollout of the world’s largest dry bulk carriers by Brazilian mining giant Vale in the first half of 2011, was expected to choke off a recovery in the freight market for years.
The global dry bulk fleet was seen expanding by 11 per cent next year to 594 million deadweight tonnes, outpacing demand growth of 8 per cent, analysts said.
Chinese steel mills were expected to boost iron ore imports in 2011 as the government loosens caps on electricity use, imposed earlier this year to meet energy efficiency targets.
‘The biggest positive could come from China ramping up steel production with the lifting of the power restrictions that strangled production in the fourth quarter,’ said Janet Lewis, shipping analyst for Macquarie Securities.
Chinese iron ore imports were expected to rise as much as 10 per cent from a projected 620-630 million tonnes this year, traders and analysts said.
An unusually cold winter in China could also increase demand for foreign coal in the world’s second largest economy and support global freight rates.
‘Weather will be the most sensitive factor for the first quarter. A cold winter will increase coal demand and delay shipyard building capacity,’ said a senior dry bulk trader with a Chinese shipping company, who asked not to be named because he was not authorised to speak to the media.