Agri Business

Virus effect: Commodity shipping costs fall steeply

Bloomberg January 31 | Updated on January 31, 2020

The Baltic Exchange Capesize Index sank to just 1 on Thursday   -  Qilai Shen

The coronavirus crisis in China has hammered many markets this month: none may have felt a bigger impact than freight, reflecting consequences for raw materials, including iron ore that are carried by sea.

The Baltic Exchange Capesize Index – a measure of vessels for dry-bulk cargoes – sank to just 1 on Thursday. That is down 99.95 per cent this month. The wider Baltic Dry Index more than halved in January to hit the lowest since 2016.

Weakness is expected to persist amid uncertainty about how long the virus effects will last, said Ralph Leszczynski, head of research at shipbroker Banchero Costa & Co. Seasonally, rates are already low in January because of the Lunar New Year and lower demand out of Brazil on bad weather, and the virus is an added bearish factor, Leszczynski said.

Iron ore is the biggest dry-bulk cargo by volume, with annual seaborne flows totalling about 1.6 billion tonnes as vessels carry the key steel-making ingredient from giant mines in Brazil and Australia to users in China and Europe.

Miners have downplayed concerns. Australias Fortescue Metals Group Ltd said concern over the virus is impacting sentiment rather than the physical trade in iron ore. Separately, Brazil’s Vale SA said operations at Asian ports are normal.

Published on January 31, 2020

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