Baltic index rallies on capesize cargo deal surge
* Capesize earnings reach 8-month high * Ship glut still overshadowing market By Jonathan Saul LONDON, Aug 31 (Reuters) - The Baltic Exchange's main sea freight index , which tracks rates to ship dry commodities, jumped to its highest in nearly eight months on Wednesday, helped by a surge in iron ore and coal cargo activity on the larger capesize vessels. Brokers said a growing ship glut was set to cap dry bulk freight rate gains in the coming months. The overall index rose 5.34 percent or 82 points to 1,619 points, reversing three previous sessions of falls. Prior to the drop, the index had risen for 11 straight sessions, hitting a near seven-month high. "What's driving it is the continuous shortage of ships in the Atlantic, mainly capes," said Georgi Slavov, head of dry freight and basic resources research with broker ICAP Shipping. "Secondly there are very strong exports of iron ore and coal out of Brazil, and the Australian coal exports are finally catching up," he said, referring to weather-related disruption earlier this year that hampered Australian exports. Slavov said Japanese coal imports also were picking up after an earthquake earlier this year hit volumes. "We see a two-pronged push from returning demand and as imports rise to compensate for the idled nuclear capacity for maintenance in coming months," RS Platou Markets said. "Overall, we expect the dry bulk market to perform in line with our expectations, with the capesize segment to continue outperforming smaller segments." Earlier this month the index, which gauges the cost of shipping commodities including iron ore, coal and grain, dropped to its lowest in more than three months after falling for 18 consecutive sessions. It has remained erratic and has declined over 10 percent this year. The Baltic's capesize index rose 11.36 percent on Tuesday, with average daily earnings jumping to $19,610 a day and at their highest since Dec. 24 last year. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal. "Increased spot cargo volumes across the board ... bringing the market back to levels not seen since early winter. All routes expected to rise further as strong support is also seen from derivatives," broker Fearnleys said. "The sun is again shining." The Baltic's panamax index fell 0.49 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $13,035. Worries over the health of the world economy have signalled more pain and even bankruptcies among dry bulk ship owners, who face a glut of new vessels ordered when times were good. (editing by Jane Baird)
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