(LONDON) The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to its lowest level in over 14 months again on Tuesday with slow activity set to continue in the coming weeks.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.72 per cent, or 50 points, to 1,790 points and was at its lowest since April 30 last year.
'The market has continued to slide,' said Peter Norfolk, research director at broker FIS. 'Generally the tone is still very weak.'
A combination of slower iron ore activity, weaker coal imports into China, easing port congestion and the end of South America's grains export season have weighed on freight rates in recent weeks.
The Baltic index has had its worst run since 2008 and is over 55 per cent down since it first started dropping on May 27.
'Ongoing falls in the Baltic dry index into July suggest Chinese hard commodity demand - for iron ore and coal in particular - should continue to weaken this month,' said Lombard Street Research economist Melissa Kidd.
'Global chartering volumes suggest at least part of the fall in freight prices is due to weakening demand, not simply an oversupply of shipping.'
The Baltic's main index has been erratic this year, similar to 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
There has been growing uncertainty over China's ability to keep consuming commodities at the levels seen since the start of 2009, when a massive stockpiling and stimulus programme boosted imports.
The Baltic's capesize index fell 5.64 per cent on Tuesday with average capesize earnings falling to US$14,722 a day and at its lowest since January 2009.
'(Capesize) fixture volumes are light and we expect rates to remain weak through July/August,' Dahlman Rose & Co said.
The Baltic's panamax index, meanwhile, rose 0.26 per cent with panamax average daily earnings rising to US$15,680 in the first gain since June 24. The supramax index fell 1.62 per cent.
'The panamax market seems to have stabilised over the last couple of days and there have been a few coal fixtures which has helped the market,' FIS's Mr Norfolk said.
More broadly, industry concerns over the pace of the global economic recovery could hit shipping, given that about 90 per cent of the world's traded goods by volume are transported by sea. US small businesses grew more pessimistic about their economic outlook in June in the face of weak sales and political uncertainty.
Analysts said freight rates also were expected to be dampened this year due to the pace of new ships set to enter the market in 2010 and 2011. -- Reuters
