Shipping costs plunge on iron stand-off

Worries about the world economy have combined with a stand-off between ore producers and steel mills to send the key index of dry bulk shipping costs plunging nearly 25 per cent this week.

The falls mean the Baltic Dry index – which measures the cost of chartering ships used to carry dry bulk cargoes such as iron ore, coal and wheat – has now lost nearly 70 per cent of its value from the record levels set in May. The index, which stood at 4,975 points on September 19, closed Friday at 3,746 points. The average day rate to charter a cape size bulk carrier on the spot market stood at $46,162 a day, down from peaks of nearly $240,000 a day. The index lost a record 10 per cent of its value yesterday alone. Such major fluctuations are typical of dry bulk shipping markets, where small numbers of excess idle ships or small shortages of vessels can send market rates sharply down or up. Howard Bright, head of dry cargo at London-based Braemar Seascope shiprokers, put the sudden fall down partly to concerns about world economic health and, hence, demand for the commodities shipped in dry bulk ships. “We’ve now come to the conclusion that none of us is immune from what has been going on in the States and the financial problems going on there,” he said. He also pointed to Brazilian iron ore exporters’ efforts to win higher prices from Chinese steel mills, which has led to a drying-up of cargoes on the normally busy China-Brazil route. Ships lying idle off Brazil were willing to accept almost any price for a new charter, he said. Philippe Van den Abeele, of Castalia, the shipping hedge fund, said there were no (Brazilian) cargoes available and empty ships everywhere.
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