Shipping rates dropped at 25 year Low

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The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to a more than 25-year low on Wednesday as a slump in cargo business and a increasing excess of vessels .
The overall index fell 18 points or 2.65 percent to 662 points, falling below the 663 point low hit on Dec. 5, 2008 during the financial crisis and its lowest since 1986.

The shipping sector in coming months is expected to face a supply glut and glum economic outlook, including concerns over Chinese demand for raw materials, which will pressure earnings.

Weather and other disruptions in Australia and Brazil last month together with slower restocking due to an earlier Lunar New Year holiday in China this year have hit cargo activity in recent weeks.

Iron ore shipments account for around a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.

Capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, drove a rally late last year, helped by firmer coal and iron ore exports from Australia and Brazil after earlier weather disruptions as well as a pick-up in Japanese coal imports. A build-up of port congestion also provided support.

The Baltic's capesize index fell 0.07 percent on Wednesday, with average daily earnings sliding to $5,327, their lowest since March 3 last year.

Increasing Vessels Growth
Operating costs for capesizes were estimated around $7,500 to $8,000 a day.

The overall index, which gauges the cost of shipping commodities including iron ore, coal and grain, has fallen nearly 60 percent since the start of the year.

The Baltic's panamax index fell 4.14 percent. Average daily earnings for panamaxes, which usually transport 60,000 to 70,000 tonne cargoes of coal or grains, reached $5,515 a day.

Growing ship supply, which is outpacing commodity demand, is set to cap dry bulk freight rate gains in the coming months, with economic uncertainty, a financing squeeze and a slowdown in China adding to headwinds.