August 30,
The global rush for grain imports together with growing demand from Chinese steelmakers pushed up the shipping freight to a 2 month high last week i.e. around $17 to 18/tonne. The Baltic Dry Index for Iron ore, Coal, Grains and Cement jumped 67% in just over a month after it slid to its lowest since early 2009.
Russia’s ban on grain exports will force consumers in West Asia and North Africa to get supplies from elsewhere, thus, creating demand and putting pressure on freight.
At the same time, Capesize rates have doubled in less than a month after purchase of Iron ore by Chinese steelmakers, the main driver of Capesize vessel rates, have picked up. As a cumulative effect of all this, traders expect a seasonal increase in demand for Grain and Iron ore till the fourth quarter.
But some analysts have warned that the rally could be short-lived. The freight rate is determined by free interplay of market forces. As demand increases, supply will also increase. According to one estimate, the global fleet of Capesize vessels is to rise by 20% in 2010 and 2011, but the seaborne trade, and therefore, the freight is not expected to rise anywhere near this.
Source: The Business Line
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