Baltic Dry Index Rises for First Time in Eight Weeks in London

Baltic Dry Index Rises for First Time in Eight Weeks in London
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By Michelle Wiese Bockmann - Feb 6, 2012 10:45 AM ET

The Baltic Dry Index, a measure of commodity shipping costs, advanced from a 25-year low and rose for the first time since Dec. 12 after falling rates boosted the number of dry-bulk owners dropping anchor and refusing hire.
The index that tracks freight rates across four vessel sizes gained one point to 648, ending a 33-day decline as average hire costs for Panamax bulkers, the largest that can transit the Panama Canal, gained for a second consecutive session.
Earnings are reaching a bottom and pushing up rents as more ships withdraw services, Natasha Boyden, an analyst at New York investment bank Cantor Fitzgerald LP, said in an e-mailed report today.
“With rates near or below cash break-even for every vessel class we’re starting to see more ships anchoring and refusing to trade,” Boydon wrote. “We wouldn’t be surprised to see earnings find some sort of bottom at these levels, which of course doesn’t necessarily imply things will rebound any time soon.”
The index declined as much as 63 percent this year and 66 percent since Dec. 12 amid a downturn in demand for the fleet of more than 8,900 dry bulk vessels, which has expanded by a record for two consecutive years. Its close of 647 points on Feb. 3 was the lowest since August 1986, exchange data show. The index peaked at 11,793 on May 20, 2008.
The number of vessels hired in January and December declined to 749, 18 percent lower than the corresponding period 12 months earlier, according to Boyden, citing figures from Clarkson Plc, the world’s largest shipbroker.
Capesize Vessels
Average rates for Capesize vessels, that haul ore and coal and comprise about 40 percent of the dry bulk fleet capacity, declined 0.7 percent to $5,214 a day, the lowest in 11 months. Rents across five of the nine routes assessed by the gauge were higher.
Panamax rents rose 4.9 percent, the most since May, to $5,778 a day. Hire costs are still 56 percent lower this year. Supramax vessels that haul minerals and grains slid 1.2 percent to $6,277, a three-year low. Handysize ships, the smallest tracked by the gauge, were $5,590, a fall of 1.6 percent, exchange data show.