Coal, iron ore shipping rates touch new high

The cost of shipping coal, iron ore and other dry-bulk goods may stay near record highs, boosted by rising demand for raw materials and fuel.

The Baltic Dry Index, an overall measure of commodity shipping costs on different routes and ship sizes, climbed 0.9 per cent to 6,780, according to the London-based Baltic Exchange. The measure, which has been setting a record since July 24, has more than doubled in the past year.

"Summer time is still in full swing in north Asia and the demand for imports is still very much there,'' said Alex Harkess, director for dry-cargo chartering at Clarkson Asia in Singapore. "People are more bullish today than ever before. It's an extremely firm market and likely to remain so,'' he added.

Global dry-bulk volumes will probably rise about 6 per cent a year in the three years ending 2009 on demand from India and China, Deutsche Bank said in a July 17 research note. Congestion in ports in Australia and Brazil will also likely help boost rates by at least 17 per cent a year in the period, the bank said.

There's speculation Japanese utilities will buy more fuel for power plants after a July 16 earthquake prompted the closure of several nuclear reactors. Tokyo Electric Power, Japan's biggest utility, may need to increase reliance on oil-, coal- and gas-fired power plants after shutting a nuclear facility following a earthquake.

"Due to nuclear power plant shutdowns in Japan, coal demand could be catalysed,'' DnB NOR Markets, a division of DnB NOR Bank ASA, said in its July 24 weekly shipping report. "Combined with a shortage of tonnage in some regions, sentiment is positive,'' it added.

The daily rate to hire a Capesize carrier, which typically hauls 175,000 metric tonnes of goods, rose for a fourth day. It added $1,622, or 1.7 per cent, to $99,946, data from the Baltic Exchange showed.

The Baltic Capesize Index, a measure of rates for the vessels on different routes around the world, climbed 1.5 per cent to 8,678 yesterday, its fourth day of gains, according to the Baltic Exchange.

The Baltic Panamax Index, a measure of rates for seven routes of such vessels, increased 0.35 per cent to 7190 yesterday, according to the Baltic Exchange. Panamax carriers can move 70,000 tonnes of coal and other dry commodities.