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Stocks slide as Baltic Dry plummets to nine year low

Stocks slide as Baltic Dry plummets to nine year low

Hong Kong: Shipping stocks endured a miserable day across the region as investors reacted to the plummeting Baltic Dry Index which has hit a nine year low. With Chinese steel mills reducing output and in a spat with Brazilian mine Vale analysts everywhere are slashing their forecasts for shipowners' fourth quarter earnings.
Capesize rental rates tumbled 78 percent since reaching a record on June 5 of $233,988 a day on London's Baltic Exchange. The price was $52,616 yesterday.
Chinese steelmakers ''have shown no interest'' in reopening plants because of ''languid'' demand from customers such as carmakers and builders, Bank of America Corp analysts Michael Pak and James Lee said in a September 22 report. The price of hot-rolled coil steel in southern China dropped 17 percent from a June peak, according to data from Metal Bulletin.
''It's going to be pretty tough unless the steel price recovers,'' Omar Nokta, an analyst at Dahlman Rose & Co in New York told Bloomberg. Iron-ore demand is in ''disarray,'' he said.
Lower rates will likely sap earnings for the 12 members of the Bloomberg Dry Ships Index, led by Seoul-based STX Pan Ocean Co, South Korea's largest bulk-shipping line. The index is down 52 percent from this year's peak in May.
''The steel industry has ended the period of high growth in production and demand,'' Baosteel Group Corp. Chairman Xu Lejiang said September 18. ''Steel demand is not good, and we are facing falling orders from our customers.''
Mitsui O.S.K. Lines declined as much as 3.7 percent to 973 yen and traded at 976 yen as of 10:24 a.m. in Tokyo. Nippon Yusen K.K., Japan's biggest shipping line by sales, dropped as much as 2.9 percent and Kawasaki Kisen Kaisha Ltd., the third-largest, slid as much as 6.5 percent.
The Baltic Dry Index, a measure of commodity-shipping rates, dropped 7.3 percent yesterday, bringing its three-day slide to 16 percent on weaker demand for steel from Chinese construction companies. The price to lease a capesize vessel has fallen 22 percent this week, according to the Baltic Exchange.
''Further declines in the Baltic will push the shipping industry into a complete recession,'' said Yoshihisa Miyamoto, an analyst in Tokyo at Okasan Securities Co. ''Investors who sell the shipping stocks short stand to make a lot of money.''  [26/9/08]

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