Coal, iron ore shipping rates hit records amid vessel shortage

Coal and iron ore shipping rates may extend gains to records this week on rising demand to transport raw materials across the Pacific and the Atlantic amid a limited supply of vessels.

The Baltic Dry Index, an overall measure of commodity shipping costs on different routes and ship sizes, advanced 3.9% to 8,956 on Sept 21, setting a record for a second day, according to data on the London-based Baltic Exchange. This year, the measure has broken records for a total of 83 days.

"There seemed to be no stopping the market as it rocketed" in both the eastern and western regions last week, London-based shipbroker Galbraith's Ltd said in its report. The Baltic Dry Index "is threatening to break through the 9,000 barrier."

Charter rates for tankers have more than doubled in the past year, boosted by rising demand for raw materials led by China, the world's fastest-growing major economy.

Congestion in major ports, including Australia's Newcastle, the world's biggest coal- export harbour, has supported dry-bulk shipping rates. The North American grain export season is helping boost charter rates, which are typically strongest in the fourth quarter.

"It has been an active spot market from Brazil to the Far East as well as for round voyages in the Pacific,"for the panamax market, Oslo-based shipbroker Pareto Dry Cargo AS said in its Sept 21 report.

A panamax carries as much as 70,000 tonnes of coal, iron ore or grain.

The Baltic Dry Index jumped 7.9% last week, helped by gains in the futures market, shipbrokers, including Lorentzen & Stemoco AS, said.

In the market for Freight Futures Agreements(FFAs), the October contract rate for a panamax carrier on the trans-Pacific route jumped 11% last week to US$77,813 from a 4.3% slump the week before. FFAs are used to speculate on or protect against swings in the cost of transporting commodities.