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Tuesday, 10 February 2009

BALTIC DRY INDEX is shooting up

THE BALTIC DRY Index is shooting up, which spells good news for stocks of bulk shipping companies everywhere, including Cosco and STX Pan Ocean in Singapore.

Even shipbuilding stocks in Singapore have risen in the past week - not a surprise as an improvement in shipping business casts a positive though indirect outlook on their business.

The index, a measure of shipping costs for commodities, has jumped 112% since the start of the year as demand for iron ore, particularly from China, rose.

The rise had been forecasted by BNP Paribas in a report two months ago: “We expect the BDI to rise in 2009 from its dismal level to one that is closer to the marginal operating cost of a vessel.

"We do not believe that global trade can stay muted for so long and a return to sustainable levels is more likely. We think a figure around 2,000 is more likely. This could possibly come in late
1H09.”

Of late, Chinese steel makers have been replenishing iron-ore stockpiles that by mid-January were 22 percent lower than the record high set in September.

Demand has shot up as China has pledged to spend Rmb 4 trillion mostly on infrastructure projects to stimulate the economy.

The main iron ore routes to China, from Brazil and Western Australia, are at the highest since October.

The Baltic Dry Index tracks transport costs on international trade routes ended at 1,642 points on Friday (Feb 6), which is 1,089 points higher since the amazing low of 553 points on Dec 5.

The number of available capesize ships that typically haul iron ore, a steel making raw material, has fallen to almost zero, Oslo-based shipbroker Fearnley Fonds ASA said last week.

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