Shipping index shows signs of growth in China

Sarah McCammon Aug 27, 2013
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Shipping index shows signs of growth in China

Sarah McCammon Aug 27, 2013
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Shipping companies are starting to make some money after a couple of years of very rough waters.  One important indicator of the industry’s health, the Baltic Dry Index, is up, and so is the cost of shipping goods like grain and coal.

“There’s always a lot going on with dry bulk, which is why I love it,” says Jeffrey Landsberg , president of Commodore Research & Consultancy.  “It follows so many commodities.”

Those commodities include grain, coal, and especially iron ore, most of which goes to China’s steel industry. The index is up more than 60 percent from a year ago, with much of that growth in the past couple of months.

“In a period of time where most people would say we’re in a global economic malaise or we’re worried about China, the exports of iron ore into China from both Brazil and Australia have been very strong,” says David Beard, managing director of shipping research at Iberia Capital Partners.

Walter Kemmsies, chief economist with the engineering firm Moffatt & Nichol, is a bit cautious.  “It’s a tentative positive sign,” Kemmsies says, adding that the index doesn’t tell the whole story. For example, he says, a lot of orders for a few big ships can drive up the numbers, even as smaller ships sit idle.

The Baltic Dry Index doesn’t take into account oil tankers, either. Beard says companies in that line of work are struggling.

“I don’t think it’s down because the global economies are weak, although that’s part of it,” he says. “It’s really down because the U.S. is importing less oil.”

Americans are getting their oil closer to home –- from Canada -– and from the upper Midwest.

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