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Baltic capesize index hits record on China ore

Baltic capesize index hits record on China ore

London: The Baltic Exchange's capesize freight index for merchant ships hauling minerals worldwide soared to a record on Wednesday on sizzling demand for iron ore into China and increased global coal demand, reuters reported. The capesize index soared 588 points, or 3.7 percent, to a record 16,357 points, surpassing the previous all-time high struck in November last year.
"China's iron imports in April were at a new record and they are enormous -- they are almost 5 million tonnes higher than the previous record month, which is a huge rise," said Peter Norfolk, a senior dry commodities analyst at consultancy Simpson, Spence & Young.
"We are also seeing a lot of coal activity, which is positive for tonne-mile demand, and U.S. coal exports have made a strong start to the year, making up for shortfalls in supply elsewhere, especially in the Pacific," Norfolk said.
"Everything (fundamentals) is still booming," he said pinning the main driving force for the spectacular rise on raw materials demand from China.
"Demand for all these commodities is broad based, steel prices are strong everywhere, but in volume terms it is still China," he said.
Jim Lennon, a commodities analyst at Macquarie Bank who monitors freight markets, said the record clearly showed demand for natural resources had not been dented by the credit crisis or economic worries in the West.
"What it tells you is that China is still booming, which is what we always thought, and that India is requiring a lot more coal -- the shipping of commodities does not really reflect the U.S. (downturn) at all," he said.
"What it says is that there is onging demand and the world economy is growing reasonably strongly and it's more a question of congestion and a lack of ships being built than anything else," Lennon said.
Citing ship industry sources, Lennon said costs could climb even higher this year due to congestion at key export terminals in Brazil and Australia and higher projections of iron ore and coal supplies.
"There is just a huge amount of new iron ore to be shipped and so there is a real scramble. They (sources) are predicting it is going to blow out, it could go up another 20 to 30 percent," he said.
Other key Baltic indices are also close to records on robust demand for natural resources.
Freight costs on key export routes are more than 10 times higher than the economic crisis of 2001-2002, when the dot-com bubble burst and the Sept. 11 attacks hit world trade.  [15/5/08]

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