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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (987)	10/13/2003 1:00:10 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China fuels rise in shipping rates By Kevin Morrison in London Published: October 13 2003 9:44 \| Last Updated: October 13 2003 9:44 Chinese demand for raw materials to feed its booming economy has pushed up shipping freight rates into uncharted territory as the world's ocean-going bulk carriers are filled near to capacity. "Shipping rates are at levels never seen before," said Peter Willems, analyst at ship brokers JE Hyde. Rates are set with reference to indices on the Baltic Exchange, the shipbroking market in London. The Baltic Dry Index, which is the benchmark for freights on vessels carrying bulk goods, including coal, iron ore and grains, have quadrupled in the past year, and have jumped 50 per cent in the past three weeks. Record increases in Chinese imports of iron ore and steel were a key reason for the initial jump in shipping prices. An unexpected rise in coal imports for Europe, Japan and the US this year has also helped lift prices. Analysts said the recent surge had been sparked by the start of the North American grain exporting season. The US and Canada are expecting to take a larger share of the 100m-tonne-a-year wheat exporting market because of vastly improved harvests in North America, while Europe suffered one of its worst harvests in a decade because of the hot dry summer. "Grains are only a small part of the dry bulk market, but when conditions are already extremely tight, any new increase in activity can have a large effect on prices," said Mr Willems. The higher freight charges show no sign of flagging, as Chinese consumption of raw materials is forecast to keep growing at breakneck speed, putting further pressure on capacity, as the number of new carriers is not expected to match the forecast increase in demand. Analysts expect dry-bulk shipping capacity to rise about 2.5 per cent this year and 3 per cent next year, against forecast demand growth of 10 per cent for both 2003 and 2004. Philippe van den Abeele, a freight derivatives trader with Clarkson Securities, a shipping service provider, said prices for shipping rates over the next three years were forecast to remain above the long-term average. He said the current price for the daily rental of a cape-size bulk carrier, which transports iron ore and coal, was $73,000, compared with the long-term range of between $6,000 and $25,000. He said the average rate for these ships was quoted at $50,000 for 2004 and $28,000 the following year. The rise in freight rates combined with the strong rise in commodity prices this year has led to concerns that this may filter through to higher inflation, and could constrain global economy growth, as bulk carrier capacity is already stretched. news.ft.com