PETALING JAYA: The recent surge in the global shipping freight rates — the shipping bulk dry index — may signal rosy times for some sectors of the Malaysian shipping industry.

A 9% rise last week of the Baltic Dry Index (BDI), which has risen 45% so far this month, were led by the freight rates for larger vessels rated under the Baltic Capesize Index (BCI) and Baltic Panamax Index (BPI).

“I feel there will be a positive impact on the local shipping industry.

“The related industries like the ship builders and all will also be impacted. I see the recovery coming along in the shipping industry,” said a shipping analyst from a local market research firm.

However, smaller vessels that most Malaysian shipowners have, which are primarily Handysize and Handy-maxed vessels, are in a segment that has remained flat as a component of the freight rate index, an industry expert said.

“The current rally has been mainly in the Capesize vessel segment and, therefore, Malaysian shipping companies are not likely to feel a substantial impact,” said Singapore-based Jayendu Krishna who is a senior manager at Drewery Maritime Services (Asia) Pte Ltd.

The BDI tracks global freight rates for ships carrying dry-bulk commodities such as coal, iron ore and grains.

Speaking to The Malaysian Reserve over the phone, Jayendu said the Baltic Handy-maxed Index (BHI) and Baltic Supramax Index (BSI) have been fairly constant while the indexes for larger vessels, BCI and BPI, have moved consistently.

The Malaysian case is very similar to India where most shipping companies own smaller vessels, too, and are not enthused by the recent rise in the BDI.

The BDI closed at 1,636 points last Friday. The rally was fuelled by the BCI and BPI.

While the BCI was up 49 points to close at 3,446 points, the BCI rose 28 points to close at 1,306 points last Friday. In contrast, the BSI tanked six points to close at 940 points.

The Capesize vessels by capacity are above 150,000 long tonne deadweight (DWT) and transport coal, ore, and other commodity raw materials.

The Panamax vessels are between 60, 000 DWT a nd 80,000 DWT and the Supramax and Handysize vessels are 59,000DWT and below.

The rise in the freight rates for larger vessels was led by the recent spurt in China’s demand for iron ore and coal from Brazil and Australia, which pushed up global shipping freight rates to their highest level in more than 18 months.

Nevertheless, not all is glum. The Malaysian shipping companies dealing in dry bulk like Malaysian Bulk Carriers Bhd may be impacted only if there is dearth of Capesize ships and the demand for smaller ones comes in.

“Once the Capesize ships become too costly (to hire), parcels would be broken down and this is when demand for Panamax and Supramax would trickle in,” said someone from the industry.

A round trip from China to Australia takes about a month but, for Brazil, takes 90 days and that would keep ships off the market, leading to a dearth of vessels.

As an indicator for raw materials’ demand around the world, the index is sometimes taken as a predictor of global economic growth. The measure’s recent rally comes as commodities such as iron ore and copper start to come off their recent lows.

Some industry experts feel that the BDI rally may not be taken as a sign of a broad-based recovery in the global shipping market as the shipping industry is burdened with overcapacity.

The BDI in September 2010 recorded a three-year high of 2,995 and slumped to a low of 801 in early June. It has since then constantly taken a northward move.

Source From: FMT News

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