November 30, 2010 / 4:51 PM / 9 years ago

Baltic index falls, China PMI survey awaited

* Capesize average daily earnings at over 3-month low

* Pointers sought from Chinese manufacturing survey

By Jonathan Saul

LONDON, Nov 30 (Reuters) - The Baltic Exchange’s main sea freight index .BADI, which tracks rates to ship dry commodities, fell for a fourth session on Tuesday as slower cargo business kept pressure on the larger capesize market.

The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.14 percent, or 46 points, to 2,099 points.

“The capes can find a support only if the Chinese start restocking again, which I don’t see happening in the immediate future,” said Georgi Slavov, head of dry research and structured products at ICAP Shipping.

The Baltic’s capesize index .BACI fell 5.98 percent, with average earnings falling to $27,351, their lowest since Aug. 10. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.

A decline in iron ore imports from India had previously forced China to source the key steel-making component from further afield especially Australia and Brazil, boosting demand for capesizes.

India banned exports from the key iron ore-producing state of Karnataka in July as part of a campaign against illegal mining, and the ban was upheld by the state’s high court this month.

Slavov said Indian ore exports using smaller supramaxes vessels had picked up modestly in recent days, while higher coal exports from Indonesia were supporting panamax vessels.

“That is why the supramaxes and panamaxes are finding ground now and reversing back up, while the capes are dropping,” he said. “This is just a switch from one trade flow to another.”

The Baltic’s panamax index .BPNI rose 0.89 percent on Tuesday, with average daily earnings rising to $19,068 in a seventh session of gains. The supramax index .BASI rose 0.93 percent.

The Baltic’s main index has been erratic this year, as it was in 2009, because of swings in Chinese demand for iron ore. It reached a 2010 peak of over 4,200 points in May.

CHINESE SURVEY AWAITED

Brokers said players were looking to see whether China will raise interest rates, which could lead to a pullback in ore imports and shipping activity.

Analysts awaited a survey on Chinese manufacturing activity to be released on Wednesday. [ID:nTOE6AP055] [ID:nTOE6AT077]

“We would expect Chinese authorities to issue further tightening measures — possibly an interest rate hike before Christmas — if the economy doesn’t show signs of slowing down after recent tightening measures,” Arctic Securities said. “Tomorrow’s PMI will be the first gauge.”

Analysts have said freight rates will be dampened in the coming months by the pace at which new ships are set to enter the market between 2010 and 2012, despite indications of some vessel cancellations and delays.

Goldman Sachs said it had started coverage of dry bulk shipping with a “neutral” view.

“We expect bulker rates to continue to be volatile and pressured, with supply growth outpacing demand growth,” it said.

“We do note several positive impacts that could make the ‘adjusted’ supply-demand gap more favourable, albeit still negative, including port congestion, increased China coastal trade, and order slippage/cancellations.”

Editing by Jane Baird

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