Baltic dry sea freight index makes biggest one-day fall
The Baltic Exchange's chief sea freight index for global dry commodities made its biggest one-day drop on Friday since records began in 1985.
But analysts said the fall was not related to growing fears of economic recession.
Dry commodities trading analysts have so far attributed the steep pullback from the all-time high hit last November to a correction at the top of a white-hot market and an expected seasonal downturn in shipments in the first quarter.
Sea freight prices on the index have fallen 30 per cent since mid-November.
'I don't see any reason why there should be a recession or growth element to this drop,' said Jim Lennon, a commodities analyst at Macquarie Bank who monitors freight prices. 'We've had this many times before over the last few years. We've had corrections and people have then thought it's over,' he said, pinning the decline instead on easing global port congestion and lack of fresh commodity supply.
'When I look at steel, prices have hit all-time highs. There's an iron ore shortage in China, the coal market is in chronic short supply and coal prices hit new all-time highs this week ... it's the reverse,' he noted. 'What we believe is that, over the next few months, as we see more and more iron ore capacity coming into the market there will be more ships called upon and the market will bounce back.'
'Commodity prices are still very high and that's a good gauge of how healthy world demand is,' said Peter Norfolk, senior analyst at ship consultancy Simpson, Spence & Young. 'But a key issue for this year is whether weakness in the US will spread,' he added, emphasising that last year the country saw a big slowdown in dry commodities imports like steel and cement.
However, Mr Norfolk said the weakness had to be viewed in the context of global seaborne commodities trade.
Last year, US dry commodities imports represented only 4 per cent of world seaborne commodities trade, while China represented 20 per cent.
The index, which monitors major trade routes for coal, iron ore, cement and soft commodities such as grains and sugar, sank 384 points, 4.61 per cent, to 7,949 - a four-month low.
The Baltic's Capesize index, which monitors the world's largest class of ship dedicated to hauling iron ore and coal, also saw its biggest one-day drop since records began.
Freight brokers at the Baltic Exchange said it was likely that the drop on the capesize index drove the chief index's dramatic decline.
But analysts said the fall was not related to growing fears of economic recession.
Dry commodities trading analysts have so far attributed the steep pullback from the all-time high hit last November to a correction at the top of a white-hot market and an expected seasonal downturn in shipments in the first quarter.
Sea freight prices on the index have fallen 30 per cent since mid-November.
'I don't see any reason why there should be a recession or growth element to this drop,' said Jim Lennon, a commodities analyst at Macquarie Bank who monitors freight prices. 'We've had this many times before over the last few years. We've had corrections and people have then thought it's over,' he said, pinning the decline instead on easing global port congestion and lack of fresh commodity supply.
'When I look at steel, prices have hit all-time highs. There's an iron ore shortage in China, the coal market is in chronic short supply and coal prices hit new all-time highs this week ... it's the reverse,' he noted. 'What we believe is that, over the next few months, as we see more and more iron ore capacity coming into the market there will be more ships called upon and the market will bounce back.'
'Commodity prices are still very high and that's a good gauge of how healthy world demand is,' said Peter Norfolk, senior analyst at ship consultancy Simpson, Spence & Young. 'But a key issue for this year is whether weakness in the US will spread,' he added, emphasising that last year the country saw a big slowdown in dry commodities imports like steel and cement.
However, Mr Norfolk said the weakness had to be viewed in the context of global seaborne commodities trade.
Last year, US dry commodities imports represented only 4 per cent of world seaborne commodities trade, while China represented 20 per cent.
The index, which monitors major trade routes for coal, iron ore, cement and soft commodities such as grains and sugar, sank 384 points, 4.61 per cent, to 7,949 - a four-month low.
The Baltic's Capesize index, which monitors the world's largest class of ship dedicated to hauling iron ore and coal, also saw its biggest one-day drop since records began.
Freight brokers at the Baltic Exchange said it was likely that the drop on the capesize index drove the chief index's dramatic decline.