Baltic Index Rises to 4-Month High on Atlantic Vessel Shortage
Wednesday, 07 May 2008
The Baltic Dry Index, a measure of shipping costs for commodities, rose to a four-month high after a reported jump in exports from Argentina increased speculation about a shortage of vessels in the Atlantic. The index tracking transport costs on international trade routes advanced 274 points, or 2.9 percent, to 9,855 points, according to the Baltic Exchange in London. That's the highest since Dec. 14. Prices have advanced for four consecutive weeks, the longest winning streak since October.
``We've got people jumping over each other to pick up the ships that are available for May,'' Steve Rodley, co-manager of Global Maritime Investments Ltd.'s $278 million shipping hedge fund, said by phone from London. ``There have been good reasons all year why the market hasn't really taken off, but we've been pushing gunpowder further and further down the gun.''
Harvests in Argentina, the world's second-largest soybean exporter, have accelerated on dry weather and 67 percent of the crop was collected by May 2. Production may be disrupted if farmers act on threats to block highways to protest a new levy on overseas soybean shipments.
The farmers staged a three-week strike before suspending it for 30 days on April 2. It was the biggest anti-government protest since Argentina's financial crisis of 2001.
Prices for grains such as soybeans, corn, wheat, and minerals such as iron ore reached records this year, buoyed by demand and supply disruptions.
Hire Rates
Hire rates within the Baltic's benchmark advanced for every class of ship, including handymaxes, capable of hauling 50,000 metric tons, up to capesizes, which carry loads of as much as 170,000 tons. Rising prices for hauling coal and bulk commodities benefit shipping companies such as Navios Maritime Holdings Inc., Genco Shipping & Trading Ltd. and DryShips Inc.
Coal derivatives, or financial instruments used to bet on future prices, rose to a record. The fuel for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year advanced $2.50, or 1.8 percent, to $142.50 a ton as of 4 p.m. in London, according to ICAP Plc.
The contract is influenced by freight rates that can account for as much as half the price of delivered coal. ICAP has about 30 percent of the trade in coal derivatives.
Source: Bloomberg
