Shipping Rates Drop as China Cuts Coal Need
Shipping costs plunged to almost the lowest on record following tumbling demand for coal in China and weakening growth in the nation’s iron ore purchases, reports Bloomberg.
The Baltic Dry Index, which tracks freight rates for ships carrying raw materials, has slumped to its lowest point in 29 years, hit by a shipping glut, falling commodity prices and declining import demand from China.
The BDI fell to 577 this week, its lowest level since July 1986, and a far cry from its peak of 11,793 in 2008.
Reversing growth of 16 percent the year before, China’s seaborne coal imports slid 10 percent in 2014, says Clarkson Plc, the world’s largest shipbroker.
The forecasts by economists, compiled by Bloomberg show that the Chinese economy, which buys almost half the world’s coal and ore cargoes, will grow at the slowest pace in 25 years, show.
Falling freight rates that have curbed earnings at operators from Nippon Yusen Kaisha to Star Bulk Carriers Corp. are damping new ship orders, as vessels ordered in 2013 on bullish forecasts hit the market.
The world’s fleet of dry-bulk ships far exceeds demand for the vessels that carry commodities such as iron ore and coal, with capacity estimated around 20% above demand over the past few years.
Many ships ordered at a time of booming global trade before the 2008 financial crisis have come into service as economic growth has sputtered in the years since.
Rui Guo, a freight analyst at London-based ICAP Shipping sees weak demand from China for thermal coal and iron ore.
