The Baltic Exchange's dry sea freight index for global raw materials trade sank to a 5-1/2 year low on Wednesday due to fears of recession, financial turmoil and lower demand for resources in China, analysts said. The London-based index, which tracks sea freight prices to haul commodities like coal, iron ore, cement and grains on some of the world's top export routes, fell 194 points or 10.72 percent to 1,615 -- its lowest level since February 2003.
The index has seen some of the biggest falls in its 23-year history in the last week as the deepening financial crisis and slowing demand in China saps confidence.
"It's meltdown isn't it...we're close to the bottom, but it probably will go lower," said Nick Collins, director of dry trade at Clarkson PLC ship consultancy in London.
"It's very serious because it's triggering a lot of defaults in the market and that could have a knock-on effect," he said, without specifying what that would be.
Collins was referring to charterers who had hired merchant ships for contracted periods of time but were returning them early because there was no longer a commercial incentive to keep them trading.
"The fear is that this will trigger a number of financial embarrassments, though I don't think that kind of thing is going to bring anybody down at the moment," Collins said.
Analysts have said that falling ocean freight prices to move goods and resources in the other two main ship sectors, containers to move finished goods, and tankers to deliver oil, point to slowing international trade.
"These indexes are the evidence that that is true," Collins said.
Container trade ferrying manufactured goods on some of the world's top export routes, between Asia and the U.S. west coast, and between Asia and Europe, have also been hammered.
"And that's all because of looming recession in the Western world," Collins said.
"People have been concentrating on the banks but this is evidence that it (the crisis) is filtering out in the real economy and that trade is collapsing," he said.
Sea freight prices for dry commodities usually peak in the fourth quarter on utility demand for coal in Asia and the start of the export season for American grains.
Analysts pin much of the slump on slowing demand for iron ore and coal in China. Stocks are high there, at a time when some of China's largest steelmakers have cut supply because of a slowdown in manufacturing.
Iron ore and coal demand are major drivers of sea freight prices for dry bulk resources, accounting for about half of the world's trade between them on the dedicated fleet.
Ocean freight costs to move key dry resources have fallen 86 percent since a record struck in May.
The index has seen some of the biggest falls in its 23-year history in the last week as the deepening financial crisis and slowing demand in China saps confidence.
"It's meltdown isn't it...we're close to the bottom, but it probably will go lower," said Nick Collins, director of dry trade at Clarkson PLC ship consultancy in London.
"It's very serious because it's triggering a lot of defaults in the market and that could have a knock-on effect," he said, without specifying what that would be.
Collins was referring to charterers who had hired merchant ships for contracted periods of time but were returning them early because there was no longer a commercial incentive to keep them trading.
"The fear is that this will trigger a number of financial embarrassments, though I don't think that kind of thing is going to bring anybody down at the moment," Collins said.
Analysts have said that falling ocean freight prices to move goods and resources in the other two main ship sectors, containers to move finished goods, and tankers to deliver oil, point to slowing international trade.
"These indexes are the evidence that that is true," Collins said.
Container trade ferrying manufactured goods on some of the world's top export routes, between Asia and the U.S. west coast, and between Asia and Europe, have also been hammered.
"And that's all because of looming recession in the Western world," Collins said.
"People have been concentrating on the banks but this is evidence that it (the crisis) is filtering out in the real economy and that trade is collapsing," he said.
Sea freight prices for dry commodities usually peak in the fourth quarter on utility demand for coal in Asia and the start of the export season for American grains.
Analysts pin much of the slump on slowing demand for iron ore and coal in China. Stocks are high there, at a time when some of China's largest steelmakers have cut supply because of a slowdown in manufacturing.
Iron ore and coal demand are major drivers of sea freight prices for dry bulk resources, accounting for about half of the world's trade between them on the dedicated fleet.
Ocean freight costs to move key dry resources have fallen 86 percent since a record struck in May.