By Katharine Gemmell and Weilun Soon (Bloomberg) - A key indicator of bulk shipping rates has reached a two-year high and may rise even more, say analysts. Bad weather is limiting the availability of Capesize vessels, while exporters are increasing their shipments.
The Baltic Dry Index jumped 5.5% to 3,331 points on Wednesday in London, marking its highest level since December 2023. This increase is mainly due to a more than 8% rise in the Capesize rate. Currently, bad weather is affecting the Pacific region, amidst high demand in both the Pacific and Atlantic.
“This surge looks like a perfect storm, with supply of vessels tightening and demand growing in both regions,” noted the broker Thurlestone Shipping.
The broader BDI tracks freight rates for Capesize vessels, which are large ships crucial for transporting raw materials like iron ore, coal, and grain. The index has surged 77% this year, partly due to shipping disruptions caused by the war in the Middle East.
Shares in dry-bulk shipping companies have also climbed this year, even surpassing gains by tanker owners, as disruptions in Middle East traffic impact the entire maritime industry.
Shipping and port activities in the Pacific have been severely affected by a series of typhoons. Meanwhile, Australian exporters are increasing their shipments as maintenance work concludes, and improvements to transshipment operations are enhancing ore exports from Guinea, home to the large Simandou iron ore deposit.
As a result, exporters are struggling to find vessels for longer journeys.
“As we move into the last part of the third quarter, the market has a relatively high base for freight rates just as Pacific typhoon season typically causes more disruptions at ports,” explained Wilson Wirawan, head of dry bulk shipping research at BRS Shipbrokers in Singapore.
“Delays and inefficiencies with vessels could further limit the availability of ships, providing additional support to an already strong Capesize market.”
Iron ore futures climbed 1.5% to $98.75 a ton in Singapore as of 11:22 a.m. local time.