The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry commodities, fell for the fourth straight session on Friday as freight demand for larger vessels remained weak.

Growing ship supply has been outpacing commodity demand for some time now, and is expected to cap dry bulk freight rate gains in the coming months.

The Baltic’s capesize index was down 33 points at 1,424 points.

Rates for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell for the sixth straight day, down US$421 to US$6,426. Iron-ore prices in top consumer China were near six-and-a-half-month lows earlier on Friday, while steel prices were close to their lowest in six months.

Iron ore shipments account for around a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight. An uncertain outlook for steel prices and fall in iron ore prices were weighing on dry bulk activity, analysts said. “Reports over the past weeks indicate that steel mills (in China) have started deferring iron ore cargoes. This is a worrying sign, as it implies the big operators may see less volume to be shipped under contracts,” said RS Platou Markets analyst Frode Mørkedal said in a note.

“The operators therefore need to cut costs, of which leased vessels are a likely target,” he said.

The slower-than-expected recovery in steel demand in the spring, a traditionally strong period for consumption in China, is expected to lose even more pace when construction activities slow in the summer.

The index for panamax activity fell 4 percent or 47 points to 1083. Panamax spot rates dropped for the fifth consecutive day, down US$377 to US$8,633, losing 15 percent since last Friday.

Source: The Shipping Tribune