Freight rates of small ships to go up

The cost of hiring small cargo ships able to carry grain, cement and other dry-bulk commodities may gain this week on rising demand in the US Gulf, tracking gains among bigger vessels.

The Baltic Handysize Index, which tracks rates on six routes for ships with a capacity of 38,000 metric tonnes, climbed for the 16th day, rising 0.9 per cent to 2121, according to the London-based Baltic Exchange. The Baltic Supramax Index, made up of five time-charter routes based on a bulk carrier of 52,454 tonnes, gained 0.8 per cent to a record 4373 yesterday.

A dearth of ships and congestion in the US Gulf boosted rates for small bulk carriers, said shipbrokers including London-based Galbraith's. The index tracking handysize rates increased 5 per cent last week, bringing it to 38 per cent gains this year.

"In the South Atlantic and the US Gulf area, the markets are exceptionally strong,'' Norway-based Pareto Dry Cargo said in its July 13 report.

Vessel numbers in South-east Asia have risen while those in the US Gulf were lacking, pushing rates higher, shipbrokers said.

"Hardly any handymax tonnage is showing as free, ex-west Africa for the rest of this month, thus we expect these sizzling market conditions to continue for a while,'' Galbraith's said. A handymax can carry 40,000 tonnes to 59,999 tonnes of cargo.

The average daily rate for a supramax carrier, which hauls between 50,000 tonnes to 59,999 tonnes of goods, rose $381, or 0.8 per cent, to a record $45,725 yesterday, its 18th day of gains, the Baltic Exchange data showed.

A supramax usually carries a variety of major and minor bulk cargoes. Major bulk cargoes refer to coal, iron ore and grain while minor bulk cargoes consist of cement, forest products, iron and steel products, salt, fertilizers, cement, minerals, alumina, bauxite and other construction materials.

"Supramaxes are following the bigger sectors but they are nowhere near as volatile due to the sheer number of market participants, as such supply and demand factors are not subject to significant variations propagated by a small number of owners or charterers,'' Stuart Frost, a Singapore-based broker at Norway's Lorentzen & Stemoco, said in an e-mail.

The Baltic Dry Index, a wider measure of commodity-shipping costs on different routes and ship sizes, fell for the first time in six days, losing 0.2 per cent to 6692 yesterday, according to the Baltic Exchange. The drop came amid a shorter queue of vessels waiting to load at Australia's Newcastle port, the world's biggest coal-export harbor.

The Baltic Panamax Index, a measure of rates for seven routes of such vessels, fell from a record after setting all-time highs each day since June 28. It dropped 0.2 per cent to 7301 yesterday, the first decline in 20 days. Panamax vessels typically carry 70,000 tonnes of dry goods.